CMS Did Not Always Provide Accurate Medicaid Unit Rebate Offset Amounts to State Medicaid Agencies

The Centers for Medicare & Medicaid Services (CMS) did not always provide accurate Medicaid unit rebate offset amounts (UROAs) to State Medicaid agencies (State agencies) during the period January 1, 2010, through December 31, 2014, in accordance with Federal guidance. (Under the Medicaid drug rebate program, drug manufacturers enter into rebate agreements with the Federal Government and pay rebates to States. Amounts collected by the States that are attributable to increased rebates mandated by recent legislation'UROAs'are applied against the amounts that the Federal Government pays to the States.)

CMS did not update the quarterly UROA information that it sent to the State agencies to include changes to the UROAs when covered drugs' best prices (as reported to CMS by the manufacturers) changed but the unit rebate amounts (URAs) (which CMS calculates based on product and pricing information submitted by drug manufacturers) stayed the same. We identified 6,116 National Drug Codes associated with 15,037 inaccurate UROAs that should have been updated to reflect the accurate UROA amounts in CMS's Medicaid drug rebate (MDR) system (which calculates the per unit rebate amounts) but were not. The State agencies would have used these incorrect UROA amounts to calculate rebates that they then reported to CMS, which would have resulted in incorrect rebate amounts being claimed.

We recommended that CMS conduct periodic matches that would compare the UROA information sent to State agencies to the MDR system to ensure that CMS is sending accurate rebate information.

CMS concurred with our recommendation and described actions it had taken or planned to take to implement our recommendation. Specifically, CMS said that it had implemented a process of manual checks when there are certain changes to ensure that updated UROAs are sent to State agencies. CMS added that it would update the new system to mitigate any future issues.