Health Reform WK-EDGE CMS provided inaccurate Medicaid unit rebate offset amounts to states
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Wednesday, June 6, 2018

CMS provided inaccurate Medicaid unit rebate offset amounts to states

By Victoria Moran, J.D., M.H.A.

The HHS Office of Inspector General (OIG) has concluded that CMS did not always provide accurate unit rebate offset amounts (UROAs) to state agencies from 2010 through 2014. CMS failed to update the quarterly UROAs it sent to states when covered drugs’ best prices changed but the Medicaid unit rebate amounts (URAs) did not. States would have then used the incorrect UROA amounts to calculate the federal share of rebates they reported to CMS, resulting in incorrect rebate amounts claimed. CMS confirmed the discrepancies were caused by system programming issues (OIG Report, No. A-07-17-06074, May 22, 2018).

Medicaid drug rebate program. Under section 2501 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), the amount of rebates drug manufacturers must pay to the states under the Medicaid drug rebate program increased. The UROAs are the amounts collected by states attributable to the increased rebates. They are applied against the amounts the federal government reimburses to the states. CMS, through its Medicaid drug rebate (MDR) system, calculates the URA and UROA for each drug based on product and pricing information provided by drug manufacturers, which is then provided to the states each quarter. States use the UROAs to determine the federal share of rebates they report to CMS.

Findings. To determine whether CMS provided UROAs accurately and timely, the OIG audited 765,091 UROAs from January 1, 2010, through December 31, 2014. The OIG concluded that CMS did not always provide accurate UROAs to state agencies and it did not update quarterly UROA information to include changes to UROAs when covered drugs’ best prices changed but the URAs stayed the same. Specifically, 6,116 National Drug Codes (NDCs) associated with 15,037 inaccurate UROAs that should have been updated to reflect accurate UROA amounts in the Medicaid drug rebate (MDR) system were not updated. The incorrect UROA amounts would have been used by state agencies to determine the federal share of rebates they reported to CMS, which would have caused states to claim incorrect rebate amounts.

CMS confirmed that a system programming issue led to the discrepancies. The MDR system "was only looking for UROAs changes due to a change in URA, but was not capturing UROA changes when the ORA stayed the same (i.e. but best price changed)." The OIG also concluded that CMS did not have adequate controls in place and an automated comparison between UROA information and amounts in the MDR system would have identified the discrepancies. After the OIG notified CMS of the review, CMS provided the states with adjusted information as of the quarter ended March 31, 2016.

Recommendations. The OIG recommended that CMS periodically compare UROA information sent to state agencies to the information in the MDR system. CMS agreed and added that it had implemented a process of manual checks to ensure updated UROAs are sent to the states. CMS will also update the new system to mitigate future issues.

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