Audit of The Medicaid Drug Rebate Program In California

EXECUTIVE SUMMARY:

The objective of this review was to evaluate whether the State of California (the State) had established adequate accountability and internal controls over the Medicaid drug rebate program.  We identified internal control and accountability weakness in the following areas:  (1) Quarterly Reporting, (2) Accounts Receivable System, and (3) Dispute Resolution.  Federal regulations require effective control and accountability for all funds, property, and other assets.  We found that the State:  (1) was not able to provide support for the uncollected rebate balance reported to the Centers for Medicare & Medicaid Services as of June 30, 2002 and was not reconciling the ending balance of uncollected rebates to the receivable account, (2) did not maintain a general ledger accounts receivable control account, and (3) did not actively work to resolve disputes nor make use of the state hearing mechanism.  The State partially agreed with the findings and recommendations regarding quarterly reporting and dispute resolution.  The State disagreed with our recommendation regarding the accounts receivable system.