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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 Hawaii," (A-09-07-00081)

April 14, 2008

PDF FileComplete Text of Report is available in PDF format (845 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


In a follow-up audit of Hawaii’s Medicaid drug rebate program, we found that the State had partly implemented the recommendation from our prior audit that related to collection of rebate interest but had not implemented the recommendations related to accuracy of reporting to the Centers for Medicare and Medicaid Services (CMS) and amount of the outstanding accounts receivable balance.  In addition, the State agency established controls over collecting rebates on single source drugs administered by physicians, except that it did not establish a crosswalk for single source drugs without National Drug Codes (NDC) on the claim forms.  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 recommended that the State (1) establish written policies and procedures to ensure that interest is properly collected on rebate receivable items that were outstanding before the transition to the current fiscal agent; (2) establish written policies and procedures for preparing Form CMS-64.9R to ensure the accuracy of amounts reported to CMS, including drug rebates for the supplemental program; (3) determine the amount of the outstanding rebate accounts receivable balance before the transition to the current fiscal agent and properly report the balance on Form CMS­-64.9R; and (4) establish a crosswalk for collecting rebates for single-source drugs administered by physicians for claim forms that do not include NDCs.  The State did not dispute the findings and provided information on the status of corrective actions taken.