Inconsistencies in States' Reporting of the Federal Share of Medicaid Drug Rebates

Even though States claimed drug expenditures at higher Federal financial participation (FFP) rates, they did not consistently report the Federal share of drug rebates at those higher FFP rates for one or more quarters during the period July 1, 2011 through June 30, 2012. Additionally, States used different methodologies to determine the Federal share of drug rebates.

CMS has not issued specific national guidance that instructs States to report drug rebates at the FFP rates at which drugs were originally reimbursed or that identifies acceptable methods to determine the Federal share of drug rebates. Only seven States indicated that they had received written guidance from a CMS Regional Office. Inconsistent reporting and different methodologies could lead to underreporting of the Federal share of drug rebates on the CMS-64 report and to a loss of Federal share.

We recommended that CMS issue guidance that clearly instructs States to report drug rebates at the applicable FFP rates and identify acceptable methods to determine the Federal share of drug rebates. CMS concurred with our recommendation.