Objective

To determine whether Medicaid made improper payments for brand name drugs. The audit covered the period from July 2016 through January 2022.

About the Program

The Department of Health (Department) administers New York’s Medicaid program. The Medicaid program covers medically necessary prescription and non-prescription drugs. State law directs pharmacies to substitute prescribed drugs with less expensive drugs containing the same active ingredients, dosage form, and strength. Generally, this means a brand name drug will be substituted with a generic drug that is equivalent to the brand name drug. Prescribers of drugs can indicate that a brand name drug is necessary by directing pharmacies to “dispense as written” either in writing or electronically; otherwise, a generic drug should be dispensed. Usually, brand name drugs are more expensive than generic drugs.

Key Findings

We identified $1,102,823 in Medicaid overpayments for brand name prescription drugs where generic drugs were available. Our review found:

• Overpayments of $739,446 on 16,261 fee-for-service (FFS) pharmacy claims for the period July 2016 through July 2021. These overpayments were for brand name drug claims where prescriptions allowed for generic substitutions and there was a generic drug available.
• Overpayments of $363,377 on 21 pharmacy claims paid by one managed care organization for the period October 2019 through December 2020 where a brand name drug was incorrectly dispensed and paid instead of a generic drug due to a system malfunction when the claims were processed and paid.

Additionally, we identified $1,011,990 in potential cost avoidance associated with 27,455 Medicaid FFS claims for drugs that appear to be generic drugs, but were paid using brand name pricing methods for the period April 2017 through January 2022.

Key Recommendations

• Review the improperly paid claims for brand name drugs that had generics available and ensure overpayments are recovered, as appropriate.
• Review the Department policy that caused claims for generic drugs to be paid using brand name drug pricing methods and ensure corrective actions are taken, where appropriate.