The Medicaid drug rebate program became effective in 1991 (the Social Security Act (the Act)§ 1927). For a covered outpatient drug to be eligible for Federal reimbursement under the program, the drug’s manufacturer must enter into a rebate agreement that is administered by the Centers for Medicare & Medicaid Services (CMS) and pay quarterly rebates to the States. CMS, the States, and drug manufacturers each have specific functions under the program. Manufacturers are required to submit a list of all covered outpatient drugs to CMS and to report each drug’s average manufacturer price and, where applicable, best price. On the basis of this information, CMS calculates a unit rebate amount for each drug and provides the information to the States quarterly. Covered outpatient drugs reported by participating drug manufacturers are listed in the CMS Medicaid Drug File, which identifies drugs with such fields as National Drug Code (NDC), unit type, units per package size, and product name.Section 1903(i)(10) of the Act prohibits Federal reimbursement for States that do not capture the information necessary for invoicing manufacturers for rebates as described in section 1927 of the Act. To invoice for rebates, States capture drug utilization data that identifies, by NDC, the number of units of each drug for which the States reimbursed Medicaid providers and report the information to the manufacturers (the Act § 1927(b)(2)(A)). The number of units is multiplied by the unit rebate amount to determine the actual rebate amount due from each manufacturer.States report drug rebate accounts receivable data to CMS on the Medicaid Drug RebateSchedule. This schedule is part of the Quarterly Medicaid Statement of Expenditures for theMedical Assistance Program report, which contains a summary of actual Medicaid expenditures for each quarter and is used by CMS to reimburse States for the Federal share of Medicaid expenditures.Drugs administered by a physician are typically invoiced to the Medicaid program on a claim form using Healthcare Common Procedure Coding System (HCPCS) codes. For purposes of the Medicaid drug rebate program, physician-administered drugs are classified as either single-source or multiple-source. The Deficit Reduction Act of 2005 (DRA) amended section 1927 of the Act to specifically address the collection of rebates on physician-administered drugs for all single-source physician-administered drugs and for the top 20 multiple-source physician-administered drugs. Beginning on January 1, 2007, CMS was responsible for publishing annually the list of the top 20 multiple-source drugs by HCPCS codes that had the highest dollar volume dispensed. Before the DRA, many States did not collect rebates on physician-administered drugs if the drug claims did not contain NDCs. NDCs enable States to identify the drugs and their manufacturers and to facilitate the collection of rebates for the drugs.The State agency is responsible for paying claims and collecting Medicaid drug rebates for physician-administered drugs. The State agency uses a contractor to perform drug rebate processing and to submit invoices to manufacturers. The contractor uses claim utilization data for physician-administered drugs, which it derives from claims submitted by providers, to invoice manufacturers quarterly. The State agency maintains the record of rebate accounts receivable due from the manufacturers and collects the rebates from the manufacturer.In Massachusetts, there are two sources of claims for physician-administered drugs. Claims can come from hospital outpatient billings or physician billings.
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