Inspector general report faults oversight of Medicaid prescription drug program

Not one of 14 states recently audited had adequate controls in place to ensure that all of its Medicaid drug expenditures complied with federal law, according to a new Health and Human Services Office of Inspector General report. The potential cost to state and federal taxpayers: almost $260 million.

The report found many drugs were ineligible for coverage, and faulted the federal Centers for Medicare and Medicaid Services (CMS).

"These shortcomings in internal controls adversely affected the efficiency of the Medicaid outpatient prescription drug program," the report found. "Furthermore, use of terminated or less-than-effective drugs poses potential quality-of-care implications for the beneficiaries for whom they are prescribed."

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CMS partially concurs with some of the report's findings and recommendations, but says it is manufacturers' responsibility to ensure that they only report rebate-eligible drugs to the Medicaid Drug Rebate Program.

"We will also discuss with the OIG the appropriateness of assessing civil money penalties (CMPs) on those manufacturers that submit non-rebate-eligible drugs," CMS Administrator Donald Berwick wrote.

According to the report, CMS:

• Did not always ensure that the quarterly drug tapes listed all covered outpatient Medicaid drugs;

• Did not always provide the termination dates to state agencies before the termination dates became effective; and 

• Reported some unallowable and potentially unallowable drug expenditures to state agencies but did not require the agencies to amend their claimed drug expenditures or follow up to ensure that they had done so.

As for states, they "generally did not use the quarterly drug tapes to determine whether drugs were eligible for coverage" and "did not contact CMS to determine whether drugs were eligible for coverage if the drugs were not listed on the quarterly drug tapes."

The report breaks down the hit to taxpayers.

Of $41.6 billion in drug expenditures claimed by the 14 states, unallowable and potentially unallowable drug expenditures totaled $258.8 million. The federal share — $166.6 million — breaks down to $68.7 million for drug products not listed on quarterly drug tapes, $58.1 million for terminated drugs, $39.3 million for inadequately supported drug expenditures and $429,000 for less-than-effective drugs.