Review of Medicaid Drug Rebate Collections State of Connecticut Department of Social Services As of June 30, 2002

The objectives of this audit were to determine (1) the extent of any uncollected drug rebates as of June 30, 2002, (2) whether the State agency had established adequate internal controls with regard to the Medicaid drug rebate program, and (3) the effectiveness of the actions taken by the State agency to resolve outstanding disputes. We found that controls were generally in place to record and track the collection of drug rebates, and that the federal share of drug rebate amounts was properly offset from federal Medicaid reimbursement. However, we found that procedures for reconciling and reporting the pending drug rebate amounts and the corresponding aging of these rebates on the Medicaid Quarterly Expenditure Report submitted to the Centers for Medicare and Medicaid Services (CMS) were not established. As a result, the amount reported as the pending balance at June 30, 2002 was understated by about $14 million (federal share). We recommended that the State agency ensure procedures are established to provide accurate pending rebate amounts and properly present an aging schedule of its drug rebate receivables in its quarterly reports to CMS. The State agency agreed with our audit finding and recommendation and indicated the corrective actions it has taken.