Follow-Up Audit of the Medicaid Drug Rebate Program in Washington State

In a follow-up audit of Washington State's Medicaid drug rebate program, we found that the State had implemented the recommendations from our prior audit that related to establishing (1) formal policies and procedures for its drug rebate program and (2) internal controls for segregation of duties and updating of subsidiary ledger accounts.  However, the State had not fully implemented the recommendations related to management oversight over account adjustments and writeoffs, interest verification, and dispute resolution.  In addition, the State had established controls over and accountability for collecting rebates on single-source drugs administered by physicians.  Manufacturers may make their outpatient drugs eligible for Federal Medicaid funding by entering into a rebate agreement with the Centers for Medicare & Medicaid Services and paying quarterly rebates to the States.   

We reiterated our recommendations that the State implement internal controls for management oversight over account adjustments and writeoffs, accrue interest to verify the accuracy of interest payments received, and actively work to resolve manufacturer disputes.  The State described the status of actions taken on our recommendations.