Objective

To determine whether the Medicaid program made improper payments for drugs dispensed after their drug termination date. The audit covers the period July 1, 2014 through June 30, 2019.

About the Program

The State’s Medicaid program is administered by the Department of Health (Department) and is overseen at the federal level by the Centers for Medicare & Medicaid Services (CMS). The Medicaid program covers medically necessary prescription and non-prescription drugs. Drugs may be removed from the market (i.e., terminated) for safety or commercial reasons. To ensure terminated drugs will not be dispensed or paid for, CMS requires state Medicaid programs to reject these claims on the basis of the drug’s termination date (defined as either the expiration date of the final batch produced or the date the drug was recalled for health and safety reasons). Pursuant to CMS guidelines, the Department maintains drug termination dates in eMedNY, its claims processing control system.

Key Findings

For the audit period, auditors identified $29 million in improper Medicaid payments for drugs dispensed after their termination date. Specifically:

• Medicaid managed care organizations (MCOs) made improper payments to pharmacies totaling $27.2 million. The improper payments occurred because the Department failed to communicate CMS’ “termination date” claim rejection policy to its MCOs.
• The eMedNY system made improper fee-for-service payments to pharmacies totaling $1.8 million. Nearly $1.5 million of the improper payments occurred because the Department had not received the drugs’ termination dates from CMS at the time the claims were processed. The remaining improper payments occurred because the Department did not apply its controls to all types of claim submissions (e.g., paper claims).

Key Recommendations

• Review the Medicaid payments made for terminated drugs identified by the audit and determine an appropriate course of action, including recovery where feasible.
• Formally instruct MCOs to reject the payment of claims for terminated drugs.
• Monitor managed care encounters to ensure MCOs are not paying claims for terminated drugs.