States' Collection of Rebates for Drugs Paid Through Medicaid Managed Care Organizations Has Improved

WHY WE DID THIS STUDY

In a 2012 report entitled States' Collection of Rebates for Drugs Paid through Medicaid Managed Care Organizations (OEI-03-11-00480), OIG found that 10 States were not collecting rebates for drugs paid through Medicaid managed care organizations (MCOs), despite new requirements in the Affordable Care Act (ACA) to do so. If States do not collect all eligible rebates for drugs paid through MCOs, then States and the Federal Government both fail to realize all of the savings they are owed under the Medicaid Drug Rebate Program. The 2012 OIG report recommended that CMS follow up with these 10 States and take action to enforce rebate collection if necessary. CMS concurred with this recommendation and noted steps it had taken to address the issue. This memorandum report provides an update on the status of States' collection of rebates for drugs paid through MCOs.

HOW WE DID THIS STUDY

We conducted electronic surveys and structured interviews with 51 State Medicaid agencies in November and December 2014. We asked whether States had invoiced and collected rebates for drugs paid through MCOs for each of the four quarters between July 1, 2013, and June 30, 2014. We received responses from all 51 States, a 100-percent response rate.

WHAT WE FOUND

We found that nearly all (35 of 37) States that pay for drugs through MCOs collected rebates for these drugs between July 1, 2013, and June 30, 2014, as required by the ACA. These 35 States collected $7.5 billion in rebates for drugs paid through MCOs during that time.

This represents a significant improvement compared to OIG's previous finding that only 12 of 22 States paying for drugs through MCOs were collecting rebates for those drugs in 2011. Although the 10 States that were not collecting rebates in 2011 are now doing so, we found additional States that are not collecting the rebates. Moreover, we found that nine States collected some eligible MCO rebates, but not all of them. States that are not collecting all eligible MCO rebates fail to realize all of the savings they are owed under the Medicaid Drug Rebate Program. This also affects the Federal Government because it does not receive its share of these eligible, but uncollected, MCO rebates. In keeping with OIG's previous recommendation, CMS should continue to work to ensure that all States are invoicing and collecting rebates for drugs paid through MCOs.

One specific challenge that States reported as hampering their ability to collect all eligible MCO rebates related to collecting rebates for physician-administered drugs. States reported that they could not reliably obtain the National Drug Codes from claims for such drugs, which are necessary components for invoicing rebates for these drugs. We continue to encourage CMS to address a recommendation from a 2014 OIG study on the Medicaid Dispute Resolution Program, in which OIG recommended that CMS work with States to improve the quality of claims data submitted by providers and pharmacies to improve the accuracy of rebate invoices.

This report is being issued directly in final form because it contains no new recommendations.