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One Percent of Drugs With Medicaid Reimbursement Were Not FDA-Approved

WHY WE DID THIS STUDY

Exhibit: Nearly all drugs with Medicaid reimbursement were FDA-approved

A pie chart graphic showing 96% of drugs with Medicaid reimbursment as being FDA approved

Source: OIG analysis of Medicaid and FDA data, 2016.

Previous OIG work found that Medicaid may have paid for drugs in 2008 that were not approved by the Food and Drug Administration (FDA) as safe and effective. To qualify for Federal payments under Medicaid, drugs must be FDA-approved unless they meet the criteria for an exception-for example, prescription prenatal vitamins or drugs that are prescribed during times of drug shortages.

Congress asked OIG to examine CMS's oversight of the Medicaid Drug Rebate Program and the extent to which CMS relies on the FDA's drug classifications.

HOW WE DID THIS STUDY

We obtained utilization data for drugs with Medicaid reimbursement in 2016. We used the FDA marketing categories to determine whether drugs were FDA approved. We calculated the number and percentage of (1) drugs that were FDA-approved, (2) drugs that were not FDA-approved, and (3) drugs for which we were unable to determine the FDA approval status. We also determined the amounts that Medicaid reimbursed for each of these groups of drugs in 2016. Finally, we reviewed CMS's policies and procedures for evaluating the FDA approval status of drugs in the Medicaid Drug Rebate Program.

WHAT WE FOUND

Ninety-six percent of drugs with Medicaid reimbursement in 2016 were FDA approved for safety and effectiveness. However, Medicaid reimbursed for a small percentage of drugs (1 percent, or 267 drugs) that were not FDA-approved. For the remaining drugs, we were unable to determine an FDA approval status.

In the time since our previous report, FDA has implemented our recommendation to improve the completeness and accuracy of its drug directory to ensure the directory's integrity for CMS and all other stakeholders. These improvements have strengthened CMS's ability to verify the FDA approval status of drugs in the Medicaid Drug Rebate Program. Since 2014, CMS also has implemented additional oversight activities to verify the FDA approval status of drugs. However, these improvements may not have prevented potentially inappropriate Medicaid reimbursement for a small number of drugs that were not FDA-approved.

WHAT WE RECOMMEND

We recommend that CMS (1) work with States to recoup any potentially inappropriate Federal reimbursement for drugs that CMS determines were not FDA-approved and did not meet the criteria for an exception; (2) continue to improve its reporting system to prevent inappropriate reimbursement for drugs that are not FDA-approved, and (3) work with States to ensure that they prevent inappropriate reimbursement for drugs that are not FDA approved and do not meet the criteria for an exception. CMS concurred with all three recommendations.