Comptroller Claims NYSDOH Leaves $95 Million of Drug Rebates on the Table

This week, the New York State Comptroller, Thomas P. DiNapoli, issued audit findings which claimed that the New York State Department of Health (“DOH”) failed to capture $95,100,000 in prescription drug rebates it was eligible to receive on drugs administered through the New York State fee-for-service program and the Medicaid Managed Care program from April 2010 through the end of December 2014.

Under the federal Medicaid Drug Rebate Program, enacted in 1990, states have been able to recover a portion of Medicaid prescription drug costs by requesting rebates from drug manufacturers. In 2010, the Affordable Care Act extended prescription drug rebates coverage to medications dispensed through Medicaid managed care organizations (“MMCOs”).

The Comptroller found that the unclaimed rebates resulted from certain DOH policy decisions, such as using reference resources which inadvertently omitted certain physician-administered drugs from the list of reimbursable drugs, or by refusing to bill for physician-administered drugs in Ambulatory Patient Group claims–which are claims submitted for services provided by emergency departments, hospital outpatient departments, and providers in clinical settings.

The Comptroller’s audit findings mirrored a report issued in early 2015 which focused on unclaimed rebates in MMCOs.

While the Comptroller set forth recommendations to DOH to address these issues, it should be noted that the audit report reveals a continuing disagreement between the Comptroller and DOH over whether some of the recommendations conflict with guidance from the Centers for Medicare and Medicaid Services (“CMS”).  For example, DOH and the Comptroller continue to disagree over whether rebates are available for certain Ambulatory Patient Group claims.  DOH’s response to the audit findings claimed that written CMS guidance bars rebates on certain APG claims, while the Comptroller argued in its reply that such guidance only applies to certain end-stage renal failure claims and that the Comptroller confirmed rebate eligibility directly with CMS.

Given the continuing escalation of drug costs, it is likely the Comptroller will revisit this issue in the coming years.