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Audit: Missouri Claimed Millions In Unallowable Federal Medicaid Expenses

Chris Potter
A federal audit says Missouri didn't comply with the requirements of Medicaid's drug rebate program and should refund at least $34.8 million.

Missouri claimed nearly $35 million in unallowable Medicaid reimbursements after failing to comply with requirements under Medicaid’s drug rebate program, an audit released Tuesday found.

All 50 states and the District of Columbia cover prescription drugs under the program, which helps offset the costs of outpatient prescription drugs for Medicaid patients.

Under the program, states are supposed to bill drug manufacturers for rebates. To do so, they’re required to send the manufacturers drug utilization data containing so called National Drug Codes, or NDCs, for covered drugs.

The audit, by the Department of Health and Human Services’ inspector general, concluded that the Missouri agency responsible for doing that, the Department of Social Services (DSS), failed to collect NDCs over a three-year period from Jan. 1, 2009, to Dec. 31, 2011.

The audit also questioned another $13.2 million in Medicaid reimbursements and recommended that Missouri refund the reimbursements at issue.

Rebecca Woelfel, a DSS spokeswoman, said in an email that DSS disagreed with the audit’s findings “and will not make any repayments based on the Office of Inspector General’s (OIG) analysis.”

“DSS has used and continues to use a CMS provided tool to ensure certain drugs can be identified to collect a rebate,” she said. “In essence, the OIG audit disputes the adequacy of the CMS-approved process.”

Woelfel also said that department owed no more than $7 million. She said the audit based its findings on the total costs of the drugs whereas the rebates only amount to about 20 percent of the costs.

Woelfel said the audit still needed to be approved by the Centers for Medicare and Medicaid Services (CMS), which administers the Medicaid program, and the state had the option of appealing CMS’s decision.

In earlier written comments to a draft report of the audit, DSS said the rebate-collection requirements had created “significant administrative and financial” difficulties for Missouri hospitals.

Missouri applied for a six-month hardship extension to give it additional time to comply with the drug-rebate reporting requirements. CMS granted the extension in early 2008 but it expired more than six years ago.

The audit said that DSS, in contrast to its counterparts in other states, had not taken the steps necessary to comply with the drug rebate program’s requirements.

In December, when Kansas Gov. Sam Brownback announced stopgap measures to close the state’s budget hole, he included $55 million from the drug rebate program. The funds were the biggest chunk of $100 million in “efficiencies” previously identified by Kansas Budget Director Shawn Sullivan.

Dan Margolies, editor of the Heartland Health Monitor team, is based at KCUR.

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