New York’s Medicaid program lost an estimated $31.2 million in drug rebates due to rejected pharmacy encounter claims, according to an audit released by the State Comptroller’s Office. The report found that errors in the Department of Health’s (DOH) encounter system led to nearly half a million claims being improperly excluded from rebate invoicing.
The audit, covering January 2018 through March 2023, identified 453,706 pharmacy encounter claims totaling $59.1 million in payments that were rejected by DOH’s system. These rejections prevented rebate invoices from being sent to drug manufacturers, costing the state millions.
A major issue cited in the report was the failure of DOH’s system to verify managed care recipient enrollment with Medicaid providers, leading to claims being rejected despite patients receiving prescribed medications. Auditors also found that DOH lacks a detailed review process for rejected claims and relies on aggregate acceptance rates rather than investigating individual errors.
A sample review of 140 rejected claims found that 118 were wrongly excluded, resulting in an estimated $450,690 in missed rebates. Based on this, auditors determined that the full population of rejected claims likely accounted for over $31 million in lost rebate revenue.
The audit recommended that DOH review all 453,706 rejected claims and recover missed rebates. In response, DOH disputed the estimated losses but agreed to review the claims “as resources allow.” The Comptroller’s Office warned that without corrective action, the state will continue to lose tens of millions of dollars in Medicaid rebates.
DOH has 180 days to report on any actions taken to address the audit’s findings.
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