Oregon Did Not Bill Manufacturers for Rebates for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations

From April through December 2010 (audit period), the Oregon Health Authority, Division of Medical Assistance Programs (State agency), did not comply with Federal Medicaid requirements for billing manufacturers for rebates for physician-administered drugs dispensed to enrollees of managed-care organizations (MCOs). Specifically, the State agency did not have National Drug Codes (NDCs) for drug utilization data submitted by MCOs for physician-administered drugs, and the State agency did not bill manufacturers for rebates for these drugs. The State agency estimated that it paid $11.3 million ($7.1 million Federal share) to MCOs for physician-administered drugs, an estimate we determined to be reasonable. On the basis of this amount, the State agency estimated that it did not collect rebates of $3 million ($1.9 million Federal share), an estimate we also determined to be reasonable.

The State agency did not bill manufacturers for rebates because the State agency's Medicaid Management Information System did not have an edit during our audit period to ensure that NDCs were present and valid in the MCO drug utilization data for physician-administered drugs. The State agency informed us that it implemented NDC edits on July 1, 2011. The State agency also informed us that in December 2012, it retroactively billed for and collected from manufacturers rebates for physician-administered drugs dispensed through MCOs and paid since July 1, 2011. Although State regulations and guidance required MCOs to submit NDCs for physician-administered drugs, the State agency did not ensure that MCOs submitted NDCs.

We recommended that the State agency (1) bill for and collect from manufacturers rebates for physician-administered drugs dispensed to enrollees of MCOs during our audit period and refund to the Federal Government the estimated $1.9 million Federal share, (2) bill for and collect from manufacturers rebates for physician-administered drugs dispensed to enrollees of MCOs from January 1 through June 30, 2011, and refund the Federal share of the rebates collected, (3) verify that the NDC edits (implemented on July 1, 2011) ensure that NDCs are present and valid in all drug utilization data, and (4) ensure that MCOs submit drug utilization data containing NDCs for physician-administered drugs. The State agency concurred with all of our recommendations and described corrective actions that it had taken or planned to take.