Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Medicaid Outpatient Drug Expenditures in Illinois for the Period October 1, 2003, Through September 30, 2005," (A-05-07-00019)

July 2, 2008

PDF FileComplete Text of Report is available in PDF format (8.95 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


For fiscal years 2004 and 2005, Illinois claimed $108,000 in Medicaid reimbursement for drugs that were no longer eligible for reimbursement.  The Medicaid drug rebate program generally pays for covered outpatient drugs if their manufacturers have rebate agreements with Centers for Medicare & Medicaid Services (CMS) and pay rebates to the States.  Under the drug rebate program, CMS provides the States with a quarterly Medicaid drug tape, which the States use to verify coverage of the drugs for which they claim reimbursement. 

An additional $3.5 million represented expenditures for drug products that were not listed on the quarterly drug tapes.  Because the State did not verify whether these drugs were eligible for coverage, these expenditures may not have been allowable.  We identified no other errors for the remainder of the $1.9 billion (Federal share) that the State claimed.

We recommended that the State (1) refund $108,000 to the Federal Government for drug expenditures that were not eligible for Medicaid coverage, (2) work with CMS to resolve $3.5 million in payments for drugs that were not listed on the quarterly drug tapes and that may not have been eligible for Medicaid coverage, and (3) strengthen internal controls to ensure that claimed Medicaid drug expenditures comply with Federal requirements.  The State agreed with the first two recommendations and disagreed with the third recommendation.