Medicaid Program: Maximizing Drug Rebates Under the Federal Medicaid Drug Rebate Program

Uncollected Medicaid drug rebates totaling $183.7 million during the audit period due to errors and weaknesses in the rebate collection process.

Approximately $119 million in rebates were missed because of errors in the Department's claim extraction procedures (April 2018 through October 2020).

Approximately $109.4 million in rebates were missed due to a zero-dollar paid error, where claims showed zero Medicaid payment in data sent to Magellan, though actual payments were about $91.1 million.

Approximately $9.4 million in rebates were missed due to incorrect drug unit reporting, with $912,587 invoiced instead of about $10.3 million.

Approximately $16.7 million in rebates were missed due to invalid NDC/procedure code combinations or delays in crosswalk updates.

Over $1.7 million in rebates were missed due to unclassified drug codes on claims.

PACE claims: $12.8 million in rebates for Medicaid-only PACE recipients not previously included, eligible for rebates.

Other claims not processed: about $6.4 million in rebates for 114,435 claims not reported or rejected during transition to Magellan.

Missed rebates totaling $993,207 on 4,102 drug claims due to reversals in the same quarter causing them to be ignored during invoicing.

Review the $44.5 million in missed rebates and invoice manufacturers, as appropriate; where rebates cannot be sought due to missing NDCs or invalid procedure code and NDC combinations on physician-administered drug claims paid by MCOs, follow up with MCOs for proper drug information or seek recovery directly from MCOs for the missed rebates.

Ensure the EIS edit is working properly and requires a valid NDC on physician-administered drug encounter claims.

Add or enhance system edits to ensure all claims include a valid procedure code and NDC combination, where applicable.

Add or enhance system edits to prevent the use of unclassified drug codes on claims when a procedure code has been assigned.

Formally determine whether rebates can be sought on physician-administered drug claims where the procedure code and NDC combination is not yet on the crosswalk or the procedure code is an unclassified drug code, either by invoicing claims in a subsequent quarter or by using NDC information on the claims.

Review the $12.8 million in missed rebates and invoice the manufacturers, as appropriate.

Ensure all rebate-eligible PACE encounter claims are included in the rebate process and invoiced appropriately.

Review the $6.4 million in missed rebates and invoice the manufacturers, as appropriate.

Take corrective actions to ensure rebate-eligible claims are not incorrectly rejected by the rebate contractor's system.

Review the $993,207 in missed rebates and invoice the manufacturers, as appropriate.

Periodically review Magellan's data after it processes claims to ensure drug claims eligible for rebates are not ignored during the invoicing process.

Review the $119 million in missed rebates and invoice manufacturers, as appropriate.