Virginia Did Not Bill Manufacturers for Some Rebates for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations

For the period January 1 through December 31, 2013, the Virginia Department of Medical Assistance Services, Division of Health Care Services (State agency), did not fully comply with Federal Medicaid requirements for billing manufacturers for some rebates for physician-administered drugs dispensed to enrollees of managed-care organizations (MCOs). The State agency properly billed manufacturers for rebates for drugs associated with the National Drug Codes (NDCs) in our judgmental sample. However, the State agency did not have valid NDCs for other drug utilization data submitted by MCOs for physician-administered drugs, and the State agency did not bill manufacturers for rebates for these drugs. The State agency estimated average rebates per claim billed to manufacturers, and we determined these estimates to be reasonable. We applied the estimates and determined that the State agency did not bill rebates of $5.8 million ($2.9 million Federal share) to manufacturers for physician-administered drug utilization without valid NDCs.

The State agency did not bill manufacturers for rebates for these drugs because the MCOs submitted utilization data to the State with a blank NDC field or an invalid NDC. Although the State required MCOs to submit valid NDCs for all physician-administered drug utilization, the State agency did not implement edits in its Medicaid Management Information System to ensure that MCOs submitted valid NDCs. Therefore, the State did not obtain rebates for these drugs.

We recommended that the State agency (1) work with the Centers for Medicare & Medicaid Services to resolve the drug utilization data without valid NDCs by determining the correct NDCs, billing manufacturers for the estimated $5.8 million ($2.9 million Federal share) in rebates, and refunding the Federal share of rebates collected; (2) implement Medicaid Management Information System edits to verify that NDCs are present and valid in all drug utilization data; and (3) ensure that MCOs submit drug utilization data containing NDCs for all physician-administered drugs. The State agency concurred with our recommendations and described corrective actions that it planned to take.