Audit of the Medicaid Drug Rebate Program in North Dakota

EXECUTIVE SUMMARY:

The audit objective was to evaluate whether the North Dakota Department of Human Services (DHS) had established adequate accountability and internal controls over the Medicaid drug rebate program. We determined the DHS had adequate controls over the drug rebate program as required by Federal regulations except for billing and tracking $0 unit rebate amount(s) (URA's).*  Specifically, Federal regulations require effective control over and accountability for all funds, property and other assets.  This issue occurred because the DHS did not develop or follow adequate policies and procedures with regard to $0 URAs.  As a result of the $0 URA issue, drug rebate receivables were perpetually understated and the DHS may not have received all possible drug rebates due from manufacturers.

* The CMS provides the unit rebate amount (URA) information to the State agency on a quarterly computer tape.  However, the CMS tape may contain a $0 URA if the pricing information was not provided timely, or if the computed URA has a 50 percent variance from the previous quarter.  In instances of $0 URA's, the State agency is instructed to invoice the units and the manufacturer is required to calculate the URA and remit the appropriate rebate to the State agency.