Potential Misclassifications Reported by Drug Manufacturers May Have Led to $1 Billion in Lost Medicaid Rebates

Manufacturers with rebate agreements are required to report all of their covered outpatient drugs to the Medicaid Drug Rebate Program (Medicaid rebate program). CMS calculates rebate amounts using manufacturer reported pricing and classification data. Congress asked OIG to evaluate the accuracy of manufacturer reported data in the Medicaid rebate program, and CMS's oversight of that data. The Food and Drug Administration's (FDA's) marketing categories, which also are manufacturer reported, can be used to help determine whether a drug is classified as an innovator, e.g., brand name, or noninnovator, e.g., generic, product, for the purposes of calculating Medicaid rebates. Innovator products are generally subject to higher base rebate amounts. Manufacturers are required to pay an additional, inflation adjusted rebate if a drug's price increases faster than inflation. When information provided by drug manufacturers is incorrect or missing, State Medicaid agencies may not be able to collect all appropriate rebates.