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

Hawaii did not fully comply with Federal Medicaid requirements for billing manufacturers for rebates for drugs dispensed to enrollees of Medicaid managed-care organizations. Hawaii properly billed manufacturers for some rebates for pharmacy and physician-administered drugs. However, it did not bill for and collect from manufacturers rebates of $18.8 million ($9.7 million Federal share). For drugs that were eligible for rebates, Hawaii did not bill for rebates of $8 million (Federal share) for pharmacy drugs and $1.6 million (Federal share) for single-source and top-20 multiple-source physician-administered drugs. For drugs that may have been eligible for rebates, Hawaii did not bill for rebates of $57,783 (Federal share) for non-top-20 multiple-source physician-administered drugs with National Drug Codes. In addition, Hawaii did not bill for rebates for 122,436 claim lines for other physician-administered drugs. Hawaii did not provide us sufficient drug utilization data to determine whether these drugs were eligible for rebates and the amount of any rebates that may have been due.

We recommended that Hawaii (1) bill for and collect from manufacturers rebates for pharmacy drugs and refund $8 million (Federal share); (2) bill for and collect from manufacturers rebates for single-source and top-20 multiple-source physician-administered drugs and refund $1.6 million (Federal share); (3) work with the Centers for Medicare & Medicaid Services (CMS) to determine whether the non-top-20 multiple-source physician-administered drugs were eligible for rebates and, if so, upon receipt of the rebates, refund up to $57,783 (Federal share) of rebates collected; (4) work with CMS to determine whether the other physician-administered drugs were eligible for rebates and, if so, determine the rebates due and upon receipt of the rebates refund the Federal share of rebates collected; (5) determine which physician-administered drugs were not billed for rebates after our audit period, determine the rebates due, and upon receipt of the rebates refund the Federal share of the rebates collected; and (6) improve oversight of the processes for rebate billing and collection to ensure that MCOs submit valid and complete drug utilization data for pharmacy and physician-administered drugs dispensed to MCO enrollees.

Hawaii concurred with the findings related to our first, fifth, and sixth recommendations and partially concurred with the findings related to our second, third, and fourth recommendations. We maintain that all of our recommendations are valid.