Department of Health and Human Services

Office of Inspector General -- AUDIT

"Follow-Up Audit of the Medicaid Drug Rebate Program in Nebraska," (A-07-07-03097)

April 10, 2008


PDF File Complete Text of Report is available in PDF format (755 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


EXECUTIVE SUMMARY:

In a follow-up audit of Nebraska’s Medicaid drug rebate program, we found that the State had not corrected all of the weaknesses identified in our previous audit.  Manufacturers may make their outpatient drugs eligible for Federal Medicaid funding by entering into a rebate agreement with CMS and paying quarterly rebates to the States.  The State had corrected the previously reported weakness in its dispute resolution hearing mechanism.  However, the State had not (1) developed a subsidiary accounts receivable system that detailed all drug rebate transactions, including adjustments; (2) reconciled the general ledger to the subsidiary accounts and to the Form CMS-64.9R; (3) reconciled the quarterly cash receipts log to the Form CMS-64.9R; (4) estimated and accrued interest on all overdue rebate balances; or (5) reported interest received on the Form CMS-64 Summary Sheet instead of as a rebate receivable.  Additionally, the State agency did not establish controls over and accountability for collecting rebates on single-source drugs administered by physicians.

We recommended that the State agency develop and follow policies and procedures that include (1) ensuring that all adjustments are traceable to the subsidiary accounts receivable system, (2) reconciling the general ledger account to the subsidiary accounts and to the Form CMS-64.9R using actual adjustments supported in the system, (3) documenting procedures for reconciling the quarterly cash receipts log to the Form CMS-64.9R, (4) estimating and accruing interest on all overdue rebate balances, and (5) reporting interest received on the Form CMS-64 Summary Sheet instead of as a rebate receivable.  We also recommended that the State begin collecting drug rebates on single-source drugs administered by physicians.  The State agreed with all of our findings and recommendations except for the finding and recommendation regarding the reconciliation of the general ledger to subsidiary accounts and to Form CMS-64.9R.