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State audit criticizes Medicaid oversight of $1.8 billion in drug rebates

Written on Mar 13, 2019

An audit released March 7 by Ohio State Auditor Keith Faber said the Ohio Department of Medicaid didn’t properly oversee $1.8 billion in drug rebates received in the last fiscal year and it might have left some money on the table as a result.

Among the problems auditors found was that Medicaid “did not include a requirement in the contract requiring (the company handling rebates) to have an independent public accounting firm perform agreed-upon procedures to verify the completeness of the state of Ohio’s drug rebate revenue, in that rebate revenue was properly collected from all applicable manufacturers and that revenue was relieved timely...”

The issue of rebates handled by large pharmacy benefit managers contracted with Medicaid managed-care plans has generated controversy over the past year. But Medicaid spokeswoman Melissa Ayers said the issues raised by the auditor didn’t have to do with the managed care plans or the PBMs.

The auditor’s report indicated that people switching jobs within the Medicaid department was responsible for the weaknesses that auditors identified.

“Based on discussions with management, it appears that personnel transitions led to the control weaknesses noted, as well as the omission of the requirement for an (independent accountant) engagement (by Change Healthcare) from the contract,” the report said.

In addition to not making sure Change Healthcare had hired an independent auditor, Faber’s office found that Ohio Medicaid didn’t reconcile the rebate money it actually received with the amounts that Change Healthcare reported.