Purpose

To determine the extent of implementation of the two recommendations included in our initial audit report, Temporary Holding Account Rebate Revenue (2019-S-27).

Background

The New York State Health Insurance Program (NYSHIP), administered by the Department of Civil Service (Civil Service), provides health insurance coverage to over 1.2 million active and retired State, local government, and school district employees and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, covering nearly 1.1 million members. 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. In accordance with the contract, CVS Health was required to negotiate agreements with drug manufacturers for rebates and remit the rebate revenue to Civil Service.

Our initial audit report, issued on October 17, 2019, sought to determine whether CVS Health remitted to Civil Service all commercial drug rebate revenue attributable to eligible prescription drug claims in its temporary holding account. We found that CVS Health improperly designated a temporary holding account, used to process certain prescription drug claims, as “non-rebate-eligible.” As a result, CVS Health did not seek rebates from drug manufacturers on claims in the temporary holding account that were, in fact, rebate-eligible. We identified $428,958 in rebate revenue that was due to Civil Service for rebate-eligible claims in the temporary holding account for the period January 1, 2014 through December 31, 2018. CVS Health agreed Civil Service is due the rebates and agreed to remove the “non-rebate-eligible” designation from the account. As a result, we projected Civil Service would receive additional rebates of $1.27 million attributable to rebate-eligible claims in the holding account over the next contract period of January 1, 2019 through December 31, 2023.

Key Finding

CVS Health has made significant progress in correcting the problems we identified in the initial report, having implemented both recommendations.