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Report (OEI-05-11-00580)

Medicaid Drug Rebate Dispute Resolution Could Be Improved

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The Medicaid drug rebate program is a significant source of savings for States and the Federal government. Between 2011 and 2013, the rebate program saved Medicaid an average of $17.5 billion annually-an amount that will grow as a result of changes made by the Affordable Care Act. Sometimes, however, States and drug manufacturers do not agree on the amount of money that manufacturers owe in rebates. In such cases, the manufacturer and the State may enter into a dispute. Disputes are a matter of concern because they can lead to inefficient use of resources and lost money for States and the Federal Government.


We requested data from 31 States to determine the extent to which rebate amounts were disputed. We also surveyed 12 States (including 6 from the group of 31) in more depth to determine the causes of the most frequent types of disputes and the challenges associated with resolving them. We interviewed relevant staff from these States, five manufacturers, and CMS to determine the measures that each has taken to prevent and resolve disputes.


Twenty-nine of thirty-one States that could provide data estimated that only a small percentage of rebate dollars were disputed. The 12 selected States indicated that within this small percentage, certain types of disputes occur frequently. These States reported that poor quality claims data lead to disputes regarding unit of measure conversions and physician-administered drugs. In addition, States reported that poor-quality data regarding ineligible drugs lead to disputes about drugs purchased at a discount under the 340B Drug Pricing Program and terminated drugs.

The 12 selected States reported that once disputes are initiated, they struggle to provide the data necessary to resolve them. States reported difficulties in providing claims data or source data to help resolve disputes. Finally, the selected States and manufacturers expressed interest in greater CMS involvement in preventing and resolving disputes.


We recommend that to help prevent and resolve drug rebate disputes, CMS (1) work with States to improve the quality of claims data submitted by providers and pharmacies, (2) help States obtain better data on ineligible drugs, (3) facilitate States' submission of standardized claims data, and (4) establish a stronger role in dispute resolution. CMS concurred with our first three recommendations and partially concurred with our fourth recommendation.

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