Department of Civil Service

New York State Health Insurance Program: Payments for Repackaged Brand Name Drugs Dispensed Under the Empire Plan

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government and school district employees and their dependents. The Empire Plan (Plan) is the primary health benefits plan for NYSHIP and includes prescription drug coverage. The Department of Civil Service (Department) contracts with United HealthCare (United) to provide prescription drug coverage under the Plan. United subcontracted its claims processing and payment functions for drug coverage to Medco Health Solutions, Incorporated (Medco). In addition, to help limit costs to the Plan, the contract requires a claim payment for a brand name drug to be based on a prescribed discount from the manufacturer’s Average Wholesale Price.

To reduce medication errors, the pharmaceutical industry developed processes for placing drugs into single dose packaging (versus traditional multi-dose bottles). This is commonly known as “repackaging,” which tends to increase the production costs, Average Wholesale Prices, and retail prices for a drug. The contract requires United to have controls in place to protect the State from any inflated costs associated with claims for repackaged brand name drugs. For the period January 1, 2008 through July 9, 2010, the State paid United about $3.1 million for 11,015 claims for repackaged brand name drugs. However, we found that United/Medco’s efforts did not adequately protect the State from excessive costs for repackaged drugs. We concluded that some pharmacies submitted excessive claims for repackaged drugs. As a result, the State overpaid $996,751 during our audit period for 8,185 claims for repackaged drugs. We recommended ways to improve the controls used by United/Medco to protect the State from excessive costs for repackaged drugs.

For a complete copy of Report 2010-S-38 click here.
For a copy of the 90-day response click here.