The New York State Manufacturer Rebate Program Significantly Reduced Medicaid Costs for Home Blood-Glucose Test Strips But Could Achieve Additional Reductions

The New York State Department of Health (Health Department) achieved savings of approximately 51 percent for the New York State Medicaid program by obtaining manufacturer rebates through its preferred diabetic supply program. However, the Health Department could have achieved additional savings of approximately $5.9 million by establishing a competitive bidding program for test strips similar to the Medicare program. Medicare has a competitive acquisition program (competitive bidding) under which prices for selected medical supplies, including mail-order test strips, sold in specified competitive bidding areas (CBAs) are determined by suppliers' bids rather than a fee schedule.

We determined that the Medicare reimbursement rates for mail-order test strips obtained through competitive bids in the nine CBAs were lower than the Health Department's average Medicaid reimbursement rate after manufacturer rebates. Specifically, the highest Medicare CBA payment rate for a 50-unit package of test strips in calendar year 2011 was $15.62, whereas New York State's net average Medicaid reimbursement rate for a 50-unit package of test strips provided during the period October 1, 2009, through September 30, 2010, was $24.54. Establishing a competitive bidding mail-order program similar to the Medicare program could have resulted in a 36-percent reduction in the price of test strips paid under the New York State Medicaid program.

We recommended that the Health Department establish a competitive bidding program similar to Medicare for the purchase of test strips, which could have resulted in additional savings to the New York State Medicaid program of $5.9 million during the period October 1, 2009, to September 30, 2010. The Health Department generally concurred with our recommendation.