Audit of the Medicaid Drug Rebate Program in the State of Tennessee

EXECUTIVE SUMMARY:

The objective of this review was to determine whether the Bureau of TennCare had established adequate accountability and internal controls over the Medicaid drug rebate program.  Our audit covered Medicaid drug rebates through June 30, 2002.  While TennCare has adequate accounting procedures and internal controls to effectively pursue outstanding receivables from drug manufacturers, we found the amounts reported to the Centers for Medicare and Medicaid Services (CMS) did not agree with the amounts supported by the accounting records.  There was no audit trail to support the drug rebate activities reported to CMS.  As a result, there is no assurance that the program has provided CMS with an accurate picture of the drug rebate program.  We recommended that TennCare verify all amounts reported to CMS to ensure that those amounts tie directly back to the amounts recorded in the accounting records. TennCare officials agreed with our findings and have taken steps to identify and correct their reporting weaknesses.