Follow-Up Audit of the Medicaid Drug Rebate Program in Iowa

In a follow-up audit of Iowa's Medicaid drug rebate program, we found that, as of June 30, 2006, the State had generally corrected the control weaknesses identified in our previous audit. However, the State had not developed adequate policies and procedures to offer the State's hearing mechanism for disputes that were 60 days old or to ensure that interest collections were properly and accurately reported. As a result, the State had not reported interest totaling $873 that was collected during our audit period. Finally, the State had established controls over and accountability for collecting rebates on single-source drugs administered by physicians. Under the drug rebate program, manufacturers receive Federal Medicaid funding for covered outpatient drugs by entering into a rebate agreement with CMS and paying quarterly rebates to the States.

We recommended that the State (1) develop and follow policies and procedures to offer use of the State's hearing mechanism to resolve disputes after 60 days; (2) develop and follow policies and procedures to properly report interest collections on the Form CMS-64 summary sheet; and (3) report interest of $873 that was collected, but not reported, during the audit period. The State concurred, either wholly or in part, with all of our findings and recommendations.