Audit Of The Medicaid Drug Rebate Program In Washington State

EXECUTIVE SUMMARY:

The objective of this review was to determine whether the Washington Department of Social and Health Services (the State Agency) had established adequate accountability and internal controls over the Medicaid drug rebate program.  We found that the State Agency had not established formal policies and procedures over the Medicaid drug rebate program as required by Federal rules and regulations.  We also identified internal control and accountability weaknesses in the State Agency's informal procedures regarding:  (1) segregation of duties, (2) adjustments and write-offs, (3) subsidiary ledger, (4) interest, and (5) dispute resolution.  As a result, the State Agency did not adequately establish policies, procedures, and internal controls to account for drug rebate program transactions.  In addition, the lack of adequate internal controls increased the risk for fraud, waste and abuse of drug rebate program funds.  The State Agency disagreed with our finding regarding segregation of duties but, generally concurred with our other findings.