The New York State Department of Health (DOH) has failed to collect $38.6 million in Medicaid drug rebates, despite efforts to recover previously missed payments, according to a follow-up audit released by the State Comptroller’s Office.
The report, published on December 20, reviewed DOH’s progress in addressing issues found in a 2023 audit, which had identified $183.7 million in uncollected rebates. While the agency has recovered $124.2 million and taken steps to prevent future losses, auditors found that significant gaps remain in the rebate collection process.
The Medicaid Drug Rebate Program requires drug manufacturers to pay rebates to state Medicaid programs in exchange for coverage of their drugs. However, errors in claims processing, incomplete information from managed care organizations (MCOs), and oversight failures led to millions of dollars in missed rebates.
Among the key findings:
- DOH invoiced only 68% of the missed rebates from the previous audit, with $38.6 million still outstanding.
- A routine “lookback” process was established to collect rebates on claims with errors, but only some missing rebates were recovered.
- Encounter data errors continue to be a problem, with invalid procedure codes and missing National Drug Codes (NDCs) preventing full rebate collection.
- The Program of All-Inclusive Care for the Elderly (PACE) claims remain uncollected, totaling $12.8 million.
- Magellan Medicaid Administration, Inc., the state’s rebate contractor, still rejects some valid rebate claims, and DOH has not implemented a process to prevent these errors.
The audit found that DOH had fully implemented only two of the 12 recommendations from the previous report. Eight were partially implemented, and two were not implemented at all. The report urges DOH to take immediate action to collect the remaining rebates and implement system changes to prevent further losses.
DOH has 30 days to respond to the audit and outline its corrective actions.
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