Kansas Correctly Claimed Federal Reimbursement for Most Medicaid Physician-Administered Drugs

Although the Kansas Department of Health and Environment, Division of Health Care Finance (State agency), generally complied with Federal Medicaid requirements for invoicing drug manufacturers for rebates for physician-administered drugs, it claimed unallowable Federal reimbursement for some of these drugs. To collect these rebates, States submit to the manufacturers the national drug codes (NDCs) for all single-source and the top 20 multiple-source physician-administered drugs. Federal reimbursement for covered outpatient drugs administered by a physician is not available to States that do not comply with Federal requirements for capturing data to invoice and collect rebates.

The State agency did not did not submit utilization data to manufacturers for rebates associated with $53,000 (Federal share) in physician-administered drugs. Of this amount, $49,000 (Federal share) was for single-source drugs, and $4,000 (Federal share) was for top-20 multiple-source drugs. We were unable to determine whether the State agency was required to invoice for rebates for an additional $38,000 (Federal share) for other physician-administered drugs.

The State notified providers that they were required to include NDCs on all physician-administered drug claims. However, the State agency's internal controls did not always ensure that it invoiced manufacturers for rebates for all eligible physician-administered drugs.

We recommend that the State agency (1) refund to the Federal Government $49,000 (Federal share) for claims for single-source physician-administered drugs that were ineligible for Federal reimbursement; (2) refund to the Federal Government $4,000 (Federal share) for claims for top-20 multiple-source physician-administered drugs that were ineligible for Federal reimbursement; (3) work with the Centers for Medicare & Medicaid Services to determine the unallowable portion of the $38,000 (Federal share) for other claims for outpatient physician-administered drugs that may have been ineligible for Federal reimbursement and refund that amount; and (4) strengthen its internal controls to ensure that all physician-administered drugs eligible for rebates are invoiced.

The State agency fully agreed with our first, second, and fourth recommendation and did not agree with our third recommendation. We maintain that all of our recommendations are valid.