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

In a follow-up audit of Utah's Medicaid drug rebate program, we found that the State had not corrected the control weaknesses for any of the findings identified in our previous audit.  Manufacturers may make their outpatient drugs eligible for Federal Medicaid funding by entering into a rebate agreement with the Centers for Medicare & Medicaid Services (CMS) and paying quarterly rebates to the States.  In addition, the State had not established controls over and accountability for collecting rebates on single-source drugs administered by physicians.  Further, the State had not reported rebates collected for single-source drugs administered by physicians totaling $389,000.

We recommended that the State (1) develop and follow policies and procedures to maintain a general ledger accounts receivable control account, (2) develop and follow policies and procedures to reconcile the general ledger control account to the subsidiary ledgers/records and to the Form CMS-64.9R, (3) develop and follow policies and procedures to track and account for all $0 unit rebate amounts, (4) develop and follow policies and procedures to estimate and accrue interest on all overdue rebate balances, (5) develop and follow policies and procedures to make use of the State's hearing mechanism to resolve disputes after 60 days, (6) develop and follow policies and procedures to ensure that records are kept for an appropriate period, (7) develop and follow policies and procedures to establish controls over and accountability for collecting rebates on single-source drugs administered by physicians, and (8) refund to the Federal Government $389,000 ($280,000 Federal share) in rebates for single-source drugs administered by physicians that were collected but not reported.

The State agreed with all our recommendations except those regarding (1) developing and following policies and procedures to estimate and accrue interest on all overdue rebate balances and (2) developing and following policies and procedures to ensure that records are kept for an appropriate period.