Audit of the Medicaid Drug Rebate Program in Missouri

The audit objective was to evaluate whether the Missouri Department of Social Services, Division of Medical Services (DMS) had established adequate accountability and internal controls over the Medicaid drug rebate program. We determined the DMS had adequate controls over the drug rebate program as required by federal regulations except for the following areas: Form CMS 64.9R and the general ledger reconciliation, dispute resolution, and interest accrual and collection.  These issues occurred because the DMS did not develop or follow adequate policies and procedures with regard to the drug rebate program.  Federal regulations require effective control over and accountability for all funds, property and other assets.  In addition, the rebate agreements between the Centers for Medicare and Medicaid Services and the drug manufacturers require the payment of interest on all disputed, late, and unpaid drug rebates, and the use of the State hearing mechanism to resolve disputes. Our review showed that drug rebate receivables were perpetually understated and it is likely that the DMS did not receive all drug rebates and interest on disputed or late rebate payments due from manufacturers.  In addition, without routine reconciliations, the DMS did not have reasonable assurance that the rebate receivables were effectively safeguarded.