South Dakota Claimed Unallowable Federal Reimbursement for Some Medicaid Physician-Administered Drugs

The South Dakota Department of Social Services (State agency) did not always comply with Federal Medicaid requirements for invoicing manufacturers for rebates for physician-administered drugs. The State agency did not invoice manufacturers for rebates associated with $2 million ($1.2 million Federal share) in physician-administered drugs. Of this amount, $1.6 million ($941,000 Federal share) was for single-source drugs, and $458,000 ($266,000 Federal share) was for top-20 multiple-source drugs. Because the State agency's internal controls did not always ensure that it invoiced manufacturers to secure rebates, the State agency improperly claimed Federal reimbursement for these single-source drugs and top-20 multiple-source drugs.

Further, the State agency did not submit the utilization data necessary to secure rebates for all other physician-administered drugs. Although the State agency generally collected the drug utilization data necessary to invoice the manufacturers for rebates associated with these claims, providers submitted claims totaling $67,000 ($40,000 Federal share) that did not have National Drug Codes (NDCs). We were unable to determine whether the State agency was required to invoice for rebates for these other physician-administered drug claims that did not have NDCs in the utilization data. Furthermore, under the Medicaid drug rebate program, claims totaling $2 million ($1.1 million Federal share), which contained NDCs, could have been eligible for rebates. Accordingly, we set aside these amounts and are recommending that the State agency work with the Centers for Medicare & Medicaid Services to determine (1) the unallowable portion of the $67,000 ($40,000 Federal share) of claims that were submitted without NDCs and (2) whether the remaining $2 million ($1.1 million Federal share) of claims could have been invoiced to the manufacturers for rebates.