Review of Medicaid Drug Rebate Collections-State of New Mexico

The objective of this review was to determine whether the New Mexico Human Services Department (NMHSD) had established adequate accountability over the Medicaid drug rebate program.  We found that the NMHSD had not established adequate controls over the drug rebate program as required by federal rules and regulations.  Areas that lacked sufficient controls included (1) accounts receivable system, (2) segregation of duties, (3) interest accrual and collection, (4) dispute resolution, and (5) Form CMS 64.9R reconciliation.  As a result, there was (1) no reasonable assurance as to the accuracy of the $5.8 million that NMHSD reported as its outstanding balance as of June 30, 2002, (2) a potential risk for waste, fraud, or abuse of the drug rebate program funds, and (3) no assurance that NMHSD was collecting all of the interest payments for late, unpaid, or disputed rebates. The NMHSD generally agreed with our findings and recommendations, except for segregation of duties for the receipt of cash.