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Date Issued
Submitting OIG
Department of Health & Human Services OIG
Other Participating OIGs
Department of Health & Human Services OIG
Agencies Reviewed/Investigated
Department of Health & Human Services
Report Number
A-06-18-04001
Report Description

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.

Report Type
Audit
Location

MA,
United States

Number of Recommendations
5
Questioned Costs
$11,401,006
Funds for Better Use
$0

Open Recommendations

This report has 5 open recommendations.
Recommendation Number Significant Recommendation Recommended Questioned Costs Recommended Funds for Better Use Additional Details
269623 No $10,518,114 $0

We recommend that the Massachusetts Executive Office of Health and Human Services refund to the Federal Government $10,518,114 (Federal share) for claims for single-source physician-administered drugs that were ineligible for Federal reimbursement.

269624 No $882,892 $0

We recommend that the Massachusetts Executive Office of Health and Human Services refund to the Federal Government refund $882,892 (Federal share) for claims for top-20 multiple-source physician-administered drugs that were ineligible for Federal reimbursement.

269625 No $0 $0

We recommend that the Massachusetts Executive Office of Health and Human Services work with CMS to determine the unallowable portion of $4,154,511 (Federal share) for other claims for covered outpatient physician-administered drugs that were submitted without NDCs or with invalid NDCs and that may have been ineligible for Federal reimbursement and refund that amount, and whether the remaining $782,917 (Federal share) of other physician-administered drug claims could have been invoiced to the manufacturers to receive rebates and, if so, upon receipt of the rebates, refund the Federal share of the manufacturers’ rebates for those claims.

269626 No $0 $0

We recommend that the Massachusetts Executive Office of Health and Human Services work with CMS to determine and refund the unallowable portion of Federal reimbursement for physician-administered drugs that were not invoiced for rebates after December 31, 2017.

269627 No $0 $0

We recommend that the Massachusetts Executive Office of Health and Human Services strengthen its internal controls to ensure that all physician-administered drugs eligible for rebates are invoiced.

Department of Health & Human Services OIG

United States