Maryland Claimed Unallowable Federal Reimbursement for Some Medicaid Physician-Administered Drugs

The Maryland Department of Health and Mental Hygiene (State agency) did not always comply with Federal Medicaid requirements for billing manufacturers for rebates for physician-administered drugs. To collect these rebates, States submit to the manufacturers the national drug codes (NDCs) for all single-source and the top 20 multiple-source physician-administered drugs. Federal reimbursement for covered outpatient drugs administered by a physician is not available to States that do not comply with Federal requirements for capturing data to bill and collect rebates.

On the basis of our judgmental sample of electronic claims, we determined that the State agency properly billed manufacturers for rebates for $1.2 million of electronic claims in our judgmental sample. However, the State agency paid $9.4 million for claims received on paper forms but billed for rebates on only $35,000. As a result, it improperly claimed Federal reimbursement for $3.5 million of single-source and top-20 multiple-source drugs. The State agency also may have improperly claimed Federal reimbursement for an additional $2.3 million for which there was insufficient information to determine whether the claimed drugs were eligible for rebates.

The State agency said that it did not create a data field to enter the NDCs from the paper claims in the State's Medicaid Management Information System (MMIS) or implement edits to deny these paper claims for payment because of higher priority demands on its resources. As a result, the MMIS did not capture the NDCs for these claims, and the State agency did not report the drug utilization to the contractors to bill for rebates.

We recommended that the State agency (1) refund $3.5 million (Federal share) for single-source and top-20 multiple-source physician-administered drug claims that were ineligible for Federal reimbursement; (2) work with CMS to determine the portion of the $2.3 million (Federal share) for other outpatient physician-administered drug claims that was ineligible for Federal reimbursement and refund that amount; (3) work with CMS to determine and refund the unallowable Federal reimbursement for physician-administered drugs claimed without NDCs after January 1, 2011; (4) update its MMIS edits to require NDCs for payment on all drug claims; and (5) establish and implement processes to ensure that all physician-administered drug claims, including claims submitted on paper forms, are processed for rebates. The State agency concurred with our recommendations.