Federal Reports

TVA entered into a contract with a vendor to provide a fully integrated prescription drug program that would include both retail and mail order prescription drug services. The contractor was required to (1) maintain a Participating Pharmacy Network to provide retail pharmacy services, (2) provide base administrative services including processing and adjudicating TVA's prescription drug claims in accordance with TVA's plan design, (3) issue checks to participating pharmacies and/or claimants on TVA's behalf, and (4) implement and administer health management programs. We reviewed the costs billed and formulary rebates credited to TVA by the contractor. Specifically, our inspection covered: Claims payments by TVA to the contractor for the period December 22, 2001, through December 30, 2005. Base administrative fee payments made by TVA to the contractor for the period January 5, 2002, through December 5, 2003. (There were no base administrative fee payments for calendar years 2004 and 2005.) Formulary rebates credited to TVA for claims adjudicated and billed from January 1, 2002, through December 31, 2005. We found, in general, the contractor billed costs in accordance with the contract terms and TVA plan provisions with the exception of certain Consumer Directed Health Plan (CDHP) claims. In addition, formulary rebates allocated to TVA exceeded the minimum guaranteed rebate amounts, when applicable, and nothing came to our attention during the limited testing of formulary rebates that would indicate TVA rebates were not determined in accordance with contract terms. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action to resolve the issues identified regarding CDHP claims. Summary Only

Our audit of $5.9 million of costs billed to TVA by a contractor that conducted various projects and programs from April 1999 through September 2007 found the costs were fairly stated and agreed with the terms of the contract. However, about 20 percent of the payments TVA had made to the contractor were related to a specific project under which TVA acts as an administrator, collecting funds from various federal agencies and disbursing the funds to the contractor. Since the benefits received by TVA for incurring the costs of administering the collection and disbursement of the funds for the project appear negligible, we recommended TVA consider transferring the administration function for the project to the contractor. TVA management and the contractor agreed with the audit recommendation. TVA management and the contractor agreed with the audit findings. Summary Only