Review of Medicaid Drug Rebates at State Medicaid Agencies forthe State of Rhode Island

EXECUTIVE SUMMARY:

The objectives of this audit were to verify the total reported uncollected drug rebates for the State of Rhode Island as of June 30, 2002, and determine whether the State agency has established adequate internal controls with regard to the reported drug rebates uncollected balance and disputed items.  We found that quarterly reports could not be reconciled to State records that resulted in a difference of $4.7 million for the total uncollected drug rebate amount, and there were approximately $570,000 of uncollected disputed items for the period January 1994 through December 2001 that had not been resolved in accordance with Centers for Medicare and Medicaid Services (CMS) guidelines.  We recommended that the State agency reconcile State records to the amount reported to CMS, establish written procedures to recording drug rebate transactions, and resolve disputed items.  The auditee concurred with our findings and will take appropriate actions to implement our recommendations.

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