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NYS Comptroller


Taxpayers' Guide to State and Local Audits

United HealthCare
Empire Plan Drug Rebate Revenue

Issued: September 26, 2014
Link to full audit report 2013-S-41

To determine if United HealthCare Insurance Company of New York (United) credited the Department of Civil Service (Department) for all rebate revenue due under its contract with the Department. The audit covered the period January 1, 2010 through December 31, 2012 and included a review of revenue from six drug manufacturers.

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 Department contracted with United to administer the NYSHIP prescription drug program between January 1, 2008 and December 31, 2013. In accordance with the contract, United is required to negotiate agreements with drug manufacturers for rebates, discounts, and other considerations and pass 100 percent of the value of the agreements on to the prescription drug program. United subcontracted key functions of the prescription drug program to Medco Health Solutions, Inc. (Medco), including the negotiation and collection of rebates offered by drug manufacturers. In 2012, Express Scripts Holding Company (Express Scripts) acquired Medco. During our audit period, the Department was credited $248.4 million in revenue derived from agreements with the six drug manufacturers included in our audit.

Key Findings

We identified $694,227 in revenue that was not credited to the Department, including:

  • $493,348 in rebates that Express Scripts failed to allocate to the Department;
  • $159,785 in underpaid rebates that occurred because Express Scripts did not obtain the highest rebate rates to which the Department was entitled;
  • $22,408 in interest due the Department because Express Scripts did not credit rebates to the Department within 150 days as required; and
  • $18,686 in discounts that Express Scripts did not pass on to the Department.

United agreed to credit $670,470 of the $694,227 due the Department ($23,757 was still under review at the time the audit fieldwork concluded).

Throughout the course of our audit, United and Express Scripts delayed access to information we requested, and refused to provide certain amendments to manufacturer agreements. This limited our ability to ensure the Department was credited with all drug rebate and discount revenue due the State. We considered these actions to be an impairment to our audit scope and objectives.  

Key Recommendations

  • Remit the $694,227 in rebate and discount revenue identified by the audit to the Department.
  • Establish and implement oversight procedures to ensure drug rebate and discount revenues from manufacturers are correct and properly credited to the Department, consistent with the provisions of the contract.
  • Fully comply with all provisions pertaining to audits as prescribed by contracts with the Department. This includes (but is not limited to) providing timely access to all documents and other information, in unredacted form, deemed necessary by the State. 

Other Related Audits/Reports of Interest

New York State Health Insurance Program: United HealthCare: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-10)

United HealthCare: New York State Health Insurance Program Payments for Repackaged Drugs Dispensed Under the Empire Plan (2010-S-38)

United HealthCare: New York State Health Insurance Program Payments for Repackaged Drugs Dispensed Under the Empire Plan (2012-F-13)

State Government Accountability Contact Information:
Audit Director: Andrea Inman
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