Review of the Medicaid Drug Rebate Program in New Jersey

EXECUTIVE SUMMARY:

The objectives of this audit were to (1) evaluate the New Jersey State Medicaid Agency's accountability to the Centers for Medicare and Medicaid Services (CMS) for reporting outstanding rebate balances and (2) evaluate its processes and controls for drug rebate billings, collections, and dispute resolutions.  The State Agency produced timely rebate billings and collections but there were opportunities to improve the reporting of program results and accountability to CMS and to strengthen the processes for late and disputed rebates.  We recommended that the State Agency revise its procedures for reporting outstanding rebates, reduce its drawdown of Federal funds to consider the drug rebates it has collected, implement procedures to offer hearings  when disputes are not resolved, estimate and accrue interest on overdue rebate balances, report $1,134,372 ($567,186 Federal share) of interest collected on late rebate payments to CMS and update its procedures to prevent such problems in the future.