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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Medicaid Drug Rebates--Sales to Repackagers Excluded From Best Price Determinations," (A-06-00-00056)

March 27, 2001


Complete Text of Report is available in PDF format (764 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.

EXECUTIVE SUMMARY:

This final report points out a significant problem with certain manufacturers' practices affecting the determination of Medicaid drug rebates. A manufacturer's drug sales to health maintenance organizations (HMOs) are specifically required by statute to be included in the drug manufacturer's best price determination. Our review showed, however, that 7 of 53 drug manufacturers excluded sales to 8 repackagers, 3 of which were HMO repackagers, for the top 200 Medicaid reimbursed drugs in Fiscal Year 1999. As a result, the Medicaid program lost drug rebates totaling $80.7 million. We recommended that the Health Care Financing Administration (HCFA) require the drug manufacturers who excluded sales to HMOs from their best price determinations to repay the lost rebates. We also recommended that HCFA evaluate its policy guidance relating to the exclusion of sales to other (nonHMO) repackagers from best price determinations, especially where those repackagers used the drugs for their own use and did not resell them. The HCFA concurred with our recommendations.