Objective

To determine the extent of implementation of the two recommendations made in our initial audit report, Maximizing Drug Rebates for Health and Recovery Plans (Report 2017-S-61).

About the Program

In 1990, Congress created the Medicaid Drug Rebate Program, which allows states to recover a portion of their Medicaid prescription drug costs by requesting rebates from drug manufacturers. The Affordable Care Act, enacted in 2010, extended prescription drug rebates to cover medications dispensed to enrollees of Medicaid managed care organizations. In October 2015, adult Medicaid recipients with significant behavioral health needs began to be enrolled into Health and Recovery Plans (HARPs). HARPs are a type of managed care program that provides specialized care, including prescription drugs, to Medicaid recipients age 21 or older with serious mental illness and/or substance use disorders.

We issued our initial audit report on June 22, 2018. The audit objective was to determine whether the Department of Health (Department) took appropriate steps to collect all available drug rebates for HARPs. The audit covered the period October 1, 2015 through December 31, 2017. We determined the Department failed to collect rebates for HARP-related drugs since the program’s inception. We notified Department officials of this and, in response, the Department promptly updated its procedures and invoiced $425.9 million in HARP drug rebates during the initial audit. We also identified an additional $1.2 million in rebates that could be collected with further efforts by the Department. We recommended the Department regularly monitor the activities of its new rebate contractor to help ensure the accuracy of the drug rebate function and that all HARP rebates are collected from drug manufacturers.

Key Finding

Department officials made significant progress in addressing the problems we identified in the initial audit report. Since the audit, we estimated the Department was able to collect over $570 million in HARP rebates. Of the initial report’s two audit recommendations, one was implemented and one was partially implemented.

Key Recommendation

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