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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Follow-Up Audit of the Medicaid Drug Rebate Program in North Dakota," (A-07-08-03105)

April 15, 2008

PDF File Complete Text of Report is available in PDF format (1.48 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


In a follow-up audit of North Dakota’s Medicaid drug rebate program, we found that the State had partially implemented procedures to correct the weakness relating to billing and tracking $0 unit rebate amounts (URA) that we 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.  We also found that the State did not have a mechanism to adequately monitor disputed drug rebates.  Further, the State did not have written policies and procedures governing the calculation of interest on unpaid balances from drug manufacturers and generally lacked written policies and procedures over the drug rebate program.  Finally, although the State had established controls over collecting rebates on single-source drugs administered by physicians, the procedures did not fully comply with the Deficit Reduction Act of 2005 (DRA).

We recommended that the State develop procedures to track $0 URA line items and notify manufacturers when they fail to remit proper URA payment; track open and closed disputed drug rebates and make the State’s hearing mechanism available to manufacturers; invoice manufacturers for interest when appropriate; and properly report all rebates invoiced, rebate collections, and accounts receivables to ensure that CMS receives accurate drug rebate information.  We also recommended that the State ensure that it complies with the DRA’s timeframes for invoicing physician-administered drugs.  Finally, we recommended that the State invoice manufacturers for single-source physician-administered drugs as required by the DRA and the “State Medicaid Manual.”

The State did not specifically address our findings and recommendations but said that it would develop written procedures regarding the drug rebate program and procedures specific to physician-administered drugs.  The State also said that it had invoiced manufacturers for single-source physician-administered drugs.