Purpose

To determine whether the Department of Health took appropriate steps to collect all available drug rebates for Health and Recovery Plans. The audit covered the period October 1, 2015 through December 31, 2017.

Background

In 1990, Congress created the Medicaid Drug Rebate Program to reduce state and federal expenditures for Medicaid prescription drug costs. In January 1991, New York’s Medicaid program began requesting rebates from drug manufacturers. On a quarterly basis, the Department of Health (Department) submits rebate invoices to the manufacturers. The Affordable Care Act, enacted in 2010, extended prescription drug rebates to cover medications dispensed to enrollees of Medicaid managed care organizations (MCOs).

As a result of New York State’s restructuring of the Medicaid program, the Department created a new type of health plan, Health and Recovery Plans (HARP). These health plans allowed qualified managed care organizations to provide specialized care, including prescription drugs, to Medicaid recipients age 21 or older with serious mental illness and/or substance use disorders. Beginning on October 1, 2015, adult Medicaid recipients with significant behavioral health needs were enrolled into HARP.

Key Findings

• With the inception of HARP – and the transition of certain behavioral health services to this new specialized program – the Department did not take appropriate steps to ensure that HARP-related drugs were identified and processed for rebate invoicing.
• We determined that the Department erroneously excluded HARP drugs from rebate invoices due to inadequate monitoring of the drug rebate process by Department management. Rebates for HARP drugs were not invoiced and collected from manufacturers until after we informed Department officials of the errors.
• After we notified the Department of the issue, the Department updated its procedures to include HARP drug encounters in its quarterly drug rebate process. Additionally, the Department sent retroactive invoices to manufacturers for previously missed HARP rebates.
• We determined that, due to the Department’s corrective actions, $425.9 million in drug rebates has been sought for the period October 1, 2015 through December 31, 2017. An additional $1.2 million in rebates could be collected with further efforts by the Department.

Key Recommendations

• Regularly monitor the activities of the rebate contractor to ensure the accuracy of the drug rebate function.
• Take steps to invoice any remaining uncollected drug rebates from HARP encounters.

Other Related Audits/Reports of Interest

Department of Health: Medicaid Drug Rebate Program Under Managed Care (2014-S-41)
Department of Health: Optimizing Medicaid Drug Rebates (2015-S-1)
Department of Health: Errors in Identification of 340B Providers in the Medicaid Drug Rebate Program (2016-S-6)