Objective

To determine the extent of implementation of the 12 recommendations included in our initial audit report, Medicaid Program – Maximizing Drug Rebates Under the Federal Medicaid Drug Rebate Program (Report 2021-S-11).

About the Program

The Department of Health (DOH) administers the Medicaid program. For recipients enrolled in fee-for-service Medicaid, DOH makes payments for services rendered directly to health care providers. For recipients enrolled in managed care, DOH pays managed care organizations (MCOs) a monthly premium for each enrolled recipient, and the MCOs pay health care providers for services rendered. The MCOs are required to submit post-adjudicated claims (called encounters) to report to DOH about each medical service provided to recipients.

The Medicaid Drug Rebate Program (MDRP) reduces state and federal expenditures for Medicaid prescription drugs. The MDRP requires drug manufacturers to enter into a national rebate agreement with the Centers for Medicare & Medicaid Services in exchange for state Medicaid coverage of the manufacturer’s drugs. On a quarterly basis, states are required to send rebate invoices to each manufacturer for any rebate-eligible drugs their Medicaid programs paid for. DOH provides fee-for-service and encounter drug claims to its rebate contractor that, with DOH oversight, determines which claims will be invoiced to drug manufacturers.

The objective of our initial audit, issued on April 5, 2023, was to determine whether DOH took appropriate steps to collect all available drug rebates under the federal MDRP. The audit covered the period from April 2018 through March 2022 and certain claims back to January 2017. We identified uncollected drug rebates totaling $183.7 million due to errors in DOH’s claim extraction procedures, inaccurate or incomplete claim information submitted by MCOs and providers, exclusions of Program of All-Inclusive Care for the Elderly managed care claims from the rebate process, and claim processing errors made by DOH and the rebate contractor.

Key Findings

DOH made progress in addressing the issues identified in our initial audit report. For example, our follow-up determined that $124.2 million of the $183.7 million in missed rebates was invoiced to drug manufacturers, and DOH began taking many recommended corrective steps to help ensure the rebate process captured all claims eligible for rebates. Of the initial report’s 12 audit recommendations, two were implemented, eight were partially implemented, and two were not implemented.

Key Recommendation

DOH officials are requested, but not required, to provide information about any actions planned to address the unresolved issues discussed in this follow-up within 30 days of the report’s issuance.