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Office of the New York State Comptroller

Taxpayers' Guide to State and Local Audits

Department of Health
Rebates and Discounts on Physician-Administered Drugs


Issued: July 24, 2012
Link to full audit report 2010-S-72

Purpose

To determine if the Department of Health maximized Medicaid rebate collections on physicianadministered drugs and ensured that 340B physician-administered drugs were billed to Medicaid properly. The audit covers the period January 2008 - April 2011.

Background
Physician-administered drugs, such as chemotherapy, are administered to patients by a medical professional in an office setting. During our audit scope, Medicaid spent $309 million on physician-administered drugs. To reduce Medicaid costs for prescription drugs, the federal government established the Medicaid Drug Rebate Program. Under the rebate program, state Medicaid programs recover a portion of their prescription drug costs by obtaining rebates from drug manufacturers. In addition to the rebate program, Medicaid obtains savings on the costs of designated drugs through the 340B Drug Pricing Program, which requires drug manufacturers to discount (at the time of sale) the price of drugs sold to certain qualified providers. Providers are required to pass on the savings to Medicaid when they submit claims for 340B drugs.

Key Findings

  • The Department had neither maximized rebate collections on physician-administered drugs nor ensured the proper billing for 340B drugs. These problems cost the Medicaid program an estimated $24.3 million.
  • Delays in the Department's implementation of certain Medicaid computer system edits precluded nearly $8.5 million in rebate collections for physician-administered drugs. Also, flaws in the Department's collection process and the edits' design precluded additional rebates of over $13.5 million.
  • The Department missed an estimated $2.3 million in savings on 33,006 claims for 340B physician-administered drugs because medical providers billed Medicaid more than the discounted (actual) acquisition costs of the drugs.

Key Recommendations

  • We made five recommendations to the Department to recover the Medicaid overpayments and improve eMedNY system controls to allow for additional Medicaid rebate collections and ensure providers bill physician-administered drugs at the discounted drug acquisition cost.

Other Related Audits/Reports of Interest

Department of Health: Administration of the Medicaid Drug Rebate Program Report 2000-S-33


State Government Accountability Contact Information:
Audit Director: Brian Mason
Phone:(518) 474-3271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236