Series: States' Collection of Rebates for Drugs Dispensed to Medicaid MCO Enrollees

New Jersey did not fully comply with Federal Medicaid requirements for billing manufacturers for rebates for drugs dispensed to MCO enrollees. Specifically, New Jersey did not bill for and collect from manufacturers estimated rebates of $75.5 million (Federal share) for pharmacy and physician-administered drugs that were eligible or may have been eligible for rebates for our audit period. For drugs that were eligible for rebates, New Jersey did not bill for estimated rebates of $28.1 million (Federal share) for single-source and top-20 multiple-source pharmacy and physician-administered drugs. For drugs that may have been eligible for rebates, New Jersey did not bill for estimated rebates of $47.4 million (Federal share) for other pharmacy and physician-administered drugs. New Jersey did not always bill for and collect from manufacturers rebates because it did not have a system edit to ensure that NDCs were submitted for physician-administered drugs before January 1, 2015. Even after New Jersey implemented the edit on January 1, 2015, this edit did not ensure that NDCs or valid NDCs were captured for all physician-administered drugs.

Additionally, using data for our audit period, we estimated that the State agency did not bill for and collect $119.6 million (Federal share) in drug rebates from manufacturers for the nearly 4-year period before our audit period.

Michigan did not fully comply with Federal Medicaid requirements for billing manufacturers for rebates for drugs dispensed to MCO enrollees. Michigan did not bill for and collect manufacturers' rebates that we calculated to be at least $31.5 million (Federal share). Specifically, it did not bill for and collect manufacturers' rebates that we calculated to be at least (1) $30 million (Federal share) for pharmacy drugs and for single-source and top-20 multiple-source physician-administered drugs that were eligible for rebates and (2) $1.5 million (Federal share) for physician-administered drugs that may have been eligible for rebates that we set aside for CMS resolution. Michigan did not always bill for and collect manufacturers' rebates because Michigan and its contractor did not identify all of the rebate-eligible drugs in the utilization data submitted by the MCOs.

New Mexico properly billed manufacturers for all pharmacy rebates and some rebates for physician-administered drugs. However, New Mexico did not bill for and collect from manufacturers rebates for 70,131 claim lines totaling at least $1.5 million ($1.1 million Federal share) for physician-administered drugs. In addition, the State agency did not bill for rebates for 183,859 claim lines for other physician-administered drugs that may have been eligible for rebates. These errors occurred because the State agency's internal controls did not always ensure that it billed manufacturers to secure rebates and because the State agency did not always collect the utilization data necessary to bill the manufacturers.

Texas properly billed manufacturers for some rebates for physician-administered drugs. However, Texas did not bill for and collect from manufacturers rebates of $4.4 million ($2.6 million Federal share) for physician-administered drugs. For drugs that were eligible for rebates, Texas did not bill for rebates of $2.2 million (Federal Share) for single-source and top-20 multiple-source physician-administered drugs. For drugs that may have been eligible for rebates, Texas did not bill for rebates of $366,578 (Federal share) for other physician-administered drugs. In addition, Texas did not bill for rebates for 160,579 claim lines for other physician-administered drugs that may have been eligible for rebates. These errors occurred because Texas's internal controls did not always ensure that it billed manufacturers to secure rebates, and Texas did not always collect the utilization data necessary to bill the manufacturers.

Colorado did not comply with Federal Medicaid requirements because it did not collect National Drug Codes (NDCs) and invoice manufacturers for rebates for physician-administered drugs dispensed to MCO enrollees. Because the information we received from Colorado lacked NDC-level detail, we identified the physician-administered drugs that would have been eligible for a drug rebate and calculated that Colorado did not invoice for, and collect from manufacturers, an estimated $2 million ($1 million Federal share) in rebates that were associated with these physician-administered drugs. We are recommending that Colorado work with the Centers for Medicare & Medicaid Services (CMS) to determine the total amount of claims that were eligible for rebate and the unallowable portion of these claims. Although Colorado contractually required the MCOs to obtain NDCs so that drug rebates could be invoiced, the MCOs did not obtain from the providers NDC-level detail that Colorado needed to invoice for rebates for physician-administered drugs. This occurred because Colorado did not have policies and procedures in place to ensure that the MCOs obtained sufficiently detailed data to properly rebate for physician-administered drugs.