Follow-up Review of the Pennsylvania Department of Public Welfare's Compliance with the Federal Aggregate Upper Payment Limit Requirements for Prescription Drugs

EXECUTIVE SUMMARY:

Under Federal regulations, States have the flexibility to pay more for some upper limit drugs and less for others. However, the States' claims for Federal financial participation (FFP) in payments for all upper limit drugs cannot exceed the aggregate of the drugs' individual upper payment limit established by HCFA plus a reasonable dispensing fee established by the State. A prior audit found that the State agency was not in compliance with HCFA's aggregate upper payment limit for the period October 29, 1987 through October 28, 1988 and, as a result, received FFP of over $3.1 million in excess payments. Our follow-up audit indicated that the State agency remained in a noncompliance status during the period October 29, 1988 through October 28, 1989. As a result, the State agency received at least $2,402,813 of FFP in payments in excess of HCFA's aggregate upper payment limit. In addition to procedural improvements, we recommended that the State agency make a financial adjustment of $2,402,813.