Purpose

To determine if CVS Health invoiced and remitted commercial rebate revenue related to Empire Plan drug utilization in accordance with its contract with the Department of Civil Service. Our audit covered the period January 1, 2014 through June 30, 2017.

Background

The New York State Health Insurance Program (NYSHIP), administered by the Department of Civil Service (Civil Service), provides health insurance coverage to active and retired State, participating local government, and school district employees, and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, covering 1.1 million members. The Empire Plan provides its members with four types of health insurance coverage: prescription drug, medical/surgical, hospital, and mental health and substance abuse coverage. Civil Service contracted with CVS Health to administer the Empire Plan’s prescription drug program for the period January 1, 2014 through December 31, 2018. The prescription drug program costs about $2 billion annually. In accordance with the contract, CVS Health was required to negotiate agreements with drug manufacturers for rebates, discounts, and other consideration and pass 100 percent of the value of the agreements on to Civil Service. During the audit period, Civil Service received more than $600 million in commercial drug rebates.

Key Findings

We reviewed the rebate revenue generated from agreements with six drug manufacturers and found that CVS Health did not always properly invoice drug manufacturers for rebates (either in a timely manner, accurately, or at all) or remit all rebate revenue to Civil Service that it collected. As a result, Civil Service is due $2,052,653 in rebates.

Key Recommendations

• Remit $2,052,653 in rebate revenue to Civil Service.
• Establish a formal process to document, track, and resolve disputes, including issues affecting rebate allocation, so disputes can be resolved in a timely manner.
• Ensure all of the Empire Plan’s rebate-eligible drug utilization is invoiced and the resultant revenue is remitted to Civil Service.

Other Related Audits/Reports of Interest

UnitedHealthcare: Empire Plan Drug Rebate Revenue (2013-S-41)
UnitedHealthcare: Empire Plan Drug Rebates (2014-S-62)