Federal Reports

I am pleased to submit our Semiannual Report to the United States Congress. This report—our office’s 59th—highlights our audits and investigations for the six months ending March 31, 2019, pursuant to the Inspector General Act of 1978, as amended. During this period, our audit work continued to focus on high-impact areas, with an emphasis on safety, security, and reducing costs and increasing revenue. For example, our work found significantly more drug- and alcohol-related issues among employees in safety-sensitive positions—such as train engineers—than the company identified through its detection programs. We also updated our work on the company’s background check process, and found that the company had strengthened its procedures, but needed additional measures to ensure its contracted employees were properly screened. Additionally, we identified opportunities for the company to reduce its costs associated with servicing and inspecting trains and found it could have avoided $23.2 million in unnecessary costs if it better managed its leased and owned properties. Our investigative work this period led to more than $4 million in recoveries and restitutions in various fraud-related cases. In one, we uncovered a contract steering scheme in which a former Amtrak procurement official steered more than $7.6 million in contracts to a manufacturing firm in exchange for $20,000 in bribes, trips, and other items. In another, our work led to a $260,000 settlement between the Department of Justice and an Amtrak contractor that had allegedly overbilled the company since 2012. Further, our agents continue to support ongoing, complex health care fraud investigations across the country, which ultimately impact insurance claims against the company. Finally, we bid farewell to our former Inspector General, Tom Howard, who retired in January. His 44 years of service to the accountability community and the nation have left a lasting, positive mark and we remain indebted to his contributions. It is my honor to carry on the work of our dedicated and talented team—where we will continue to provide independent, thoughtful, and objective oversight on issues of importance to the company, the Board of Directors, Congress, and the public. We trust you will find this report informative.

OIG must review HHS compliance with the Improper Payments Information Act of 2002 (IPIA; P.L. No. 107-300) as amended by the Improper Payments Elimination and Recovery Act of 2010 (P.L. No. 111-204) and the Improper Payments Elimination and Recovery Improvement Act of 2012 (P.L. No. 112-248). Ernst & Young, LLP (EY), under its contract with HHS OIG, audited the fiscal year (FY) 2018 HHS improper payment information reported in the Agency Financial Report (AFR) to determine compliance with the IPIA and related guidance from the Office of Management and Budget (OMB).

When Congress established average sales price (ASP) as the basis for Medicare Part B drug reimbursement, it also provided a mechanism for monitoring market prices and limiting potentially excessive payment amounts. The Social Security Act (the Act) mandates that OIG compare ASPs with average manufacturer prices (AMPs). If OIG finds that the ASP for a drug exceeds the AMP by a certain percentage (currently 5 percent), the Act directs the Secretary of Health and Human Services to substitute the ASP-based payment amount with a lower calculated rate. Through regulation, CMS outlined that it would make this substitution only if the ASP for a drug exceeded the AMP by 5 percent in the 2 previous quarters or 3 of the previous 4 quarters.

For a covered outpatient drug to be eligible for Federal reimbursement under the Medicaid program's drug rebate requirements, manufacturers must pay rebates to the States for the drugs. However, a prior OIG review found that States did not always invoice and collect all rebates due for drugs administered by physicians.Our objective was to determine whether New Jersey complied with Federal Medicaid requirements for invoicing manufacturers for rebates for physician-administered drugs.