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

The Colorado Department of Health Care Policy and Financing (State agency) did not always comply with Federal Medicaid requirements for invoicing manufacturers for rebates for physician-administered drugs. The State agency did not invoice manufacturers for rebates associated with $13 million ($6.5 million Federal share) in physician-administered drugs. Of this amount, $10.5 million ($5.2 million Federal share) was for single-source drugs, and $2.6 million ($1.3 million Federal share) was for top-20 multiple-source drugs. Because the State agency's internal controls did not always ensure that it invoiced manufacturers to secure rebates, the State agency improperly claimed Federal reimbursement for these single-source drugs and top-20 multiple-source drugs.

Further, the State agency did not submit the utilization data necessary to secure rebates for all other physician-administered drugs. Although the State agency generally collected the drug utilization data necessary to invoice the manufacturers for rebates associated with these claims, providers submitted claims totaling $2.6 million ($1.3 million Federal share) that did not have National Drug Codes (NDCs). We were unable to determine whether the State agency was required to invoice for rebates for these other physician-administered drug claims that did not have NDCs in the utilization data. Furthermore, under the Medicaid drug rebate program, claims totaling $635,000 ($317,000 Federal share), which contained NDCs, could have been eligible for rebates.

We recommended that the State agency (1) refund to the Federal Government $5.2 million (Federal share) for claims for single-source physician-administered drugs that were ineligible for Federal reimbursement; (2) refund to the Federal Government $1.3 million (Federal share) for claims for top-20 multiple-source physician-administered drugs that were ineligible for Federal reimbursement; (3) work with the Centers for Medicare & Medicaid Services (CMS) to determine the unallowable portion of $1.3 million (Federal share) for other claims for covered outpatient physician-administered drugs that were submitted without NDCs and that may have been ineligible for Federal reimbursement and refund that amount, and to determine whether the remaining $317,000 (Federal share) of other physician-administered drug claims could have been invoiced to the manufacturers to receive rebates and, if so, upon receipt of the rebates, refund the Federal share of the manufacturers' rebates for those claims; (4) work with CMS to determine and refund the unallowable portion of Federal reimbursement for physician-administered drugs that were not invoiced for rebates after December 31, 2012; and (5) strengthen its internal controls to ensure that all physician-administered drugs eligible for rebates are invoiced.

In written comments on our draft report, the State agency did not concur with our first two recommendations but concurred with our other three recommendations and described corrective actions it planned to take.