Follow-Up Audit of the Medicaid Drug Rebate Program in New Jersey

The New Jersey Department of Human Services (the State agency) implemented the recommendations from our prior audit that related to drawing down Federal funds, offering hearings for resolving disputes, and reporting interest on late rebate payments. Although the State agency agreed to revise its procedures for the preparation of its "Medicaid Drug Rebate Schedule" (Form CMS-64.9R), no revisions have been made. The State agency also did not implement our recommendation to estimate and accrue interest on overdue rebate balances. The State agency established controls over collecting rebates on single source drugs administered by physicians.

For a manufacturer's covered outpatient drugs to be eligible for Federal Medicaid funding under the Medicaid drug rebate program, the manufacturer must enter into a rebate agreement with the Centers for Medicare & Medicaid Services (CMS) and pay quarterly rebates to the States.

We recommended that the State agency (1) revise its reporting procedures to ensure that its Form CMS-64.9R is accurate and complete, and (2) improve its procedures to ensure the entire amount of interest due from manufacturers on late or disputed rebates is collected. The State agency agreed with our recommendations.