Purpose

To determine the implementation status of the five recommendations made in our initial audit report, Optimizing Medicaid Drug Rebates (Report 2015-S-1).

Background

The State’s Medicaid program provides a wide range of health care services to individuals who are economically disadvantaged and/or have special health care needs. Since January 1991, New York has been able to recover a portion of the Medicaid prescription drug costs by requesting rebates from drug manufacturers.

We issued our initial audit report on January 7, 2016. The audit objective was to determine whether the Department was maximizing revenues from drug rebates. The audit covered the period April 1, 2010 to December 31, 2014. Our initial audit determined the Department had overlooked multiple sources of drug rebate revenue. As a result, the Department did not collect an estimated $95.1 million in available rebates during our audit period. We determined that some of the Department’s rebate policies undermined its ability to collect all drug rebate revenue to which the Medicaid program was entitled. We also identified errors in the drug rebate invoicing process that prevented the Department from properly identifying all drug rebate revenue due.

We recommended that the Department: review the rebate policies identified in the report and revise them as appropriate to ensure all drug rebates are collected; regularly reassess policy decisions to ensure their validity; review and correct the rebate processing errors identified in the report; and, where appropriate, issue retroactive rebate invoices for the drug claims we identified.

Key Findings

• Department officials made progress in addressing the problems we identified in the initial audit report; however, further actions are still needed. Corrective actions by the Department to rectify policy and processing problems have resulted in the invoicing of $47.6 million in rebates for the period April 1, 2010 to March 31, 2017. However, we also determined that as much as $118.6 million in additional rebates could still be collected for this period with further efforts by the Department. Given the current fiscal stress on state Medicaid programs, we strongly urge the Department to promptly take the steps necessary to collect these rebates.
• The Department awarded a new contract for drug rebate administration and management services. The Department and the new contractor are discussing all of the issues identified in the initial audit and in the follow-up review, and will be working to address them. The contractor will begin processing drug rebates in the first quarter of 2018.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Other Related Audit/Report of Interest

Department of Health: Optimizing Medicaid Drug Rebates (2015-S-1)