Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
S  C
TA TES   OLLECTION OF 
 
M R
EDICAID  EBATES FOR 
 
 
P -A
HYSICIAN DMINISTERED 
 
  DRUGS  
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
June 2011 
OEI-03-09-00410   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To determine the number of States that met Federal requirements 
for the collection of rebates for certain physician-administered 
drugs by June 30, 2009. 
2.  To estimate the dollar amount of rebates that States requested and 
collected from manufacturers for all physician-administered drugs in 
the first and second quarters of 2009. 
3.  To identify issues that prevented States from collecting rebates for 
all physician-administered drugs that were requested from and/or 
owed by manufacturers in the first and second quarters of 2009. 
BACKGROUND 
In general, drug manufacturers are required to pay rebates to States for 
drugs covered under their Medicaid programs.  However, a prior Office 
of Inspector General report found that only 17 States collected rebates 
from manufacturers for physician-administered drugs in 2001.  At that 
time, many States did not have a system to determine the 
manufacturer responsible for paying the rebate for these drugs and 
therefore did not collect the rebates owed.  Subsequently, the Deficit 
Reduction Act of 2005 (DRA), P.L. 109-171, specifically required that 
States collect rebates on all claims for certain physician-administered 
drugs for Federal matching funds to be available to the States.  To 
assist in meeting this requirement, the DRA also mandated that claims 
for certain physician-administered drugs include national drug codes 
(NDC), a type of drug code that identifies a drugs manufacturer, 
thereby enabling States to invoice manufacturers responsible for paying 
rebates.  Since the passage of the DRA, the Centers for Medicare & 
Medicaid Services (CMS) has taken numerous steps aimed at     
ensuring that States meet the new rebate requirements for                     
physician-administered drugs. 
To each of the 50 States participating in the Medicaid drug rebate 
program, we sent a request for first- and second-quarter 2009 
reimbursement and rebate data on physician-administered drugs.  We 
also requested that each State complete a survey about the States 
policies, procedures, and controls used to process physician-
administered drug rebates.  Forty-eight States responded to the data 
request and 49 States completed the survey.  Using data and survey 
responses, we determined the extent of DRA compliance among the 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  i   
   
E X E C U T I V E   S U M M A R Y  
 
States and identified common issues preventing States from collecting 
all the rebates for physician-administered drugs that manufacturers 
owe.  We also calculated the dollar amount States paid and the amount 
of rebates States requested and collected for physician-administered 
drugs in the first and second quarters of 2009. 
FINDINGS 
By June 2009, 73 percent of responding States reported meeting or 
exceeding the DRAs requirement to collect rebates for certain           
physician-administered drugs.  As of June 30, 2009, 36 of                  
49 responding States reported collecting rebates on all single-source, 
physician-administered drugs and the 20 multiple-source,          
physician-administered drugs with the highest dollar volume, as 
required by the DRA.  An additional 12 States reported collecting 
rebates on a subset of physician-administered drugs, but were not in full 
compliance with the DRAs rebate requirements.  Only one State 
reported that it did not collect rebates on any physician-administered 
drugs. 
Additionally, as of June 2009, 42 of 49 responding States (86 percent) 
reported meeting the DRAs requirement to collect NDCs on claims for 
certain physician-administered drugs.  States may have collected NDCs 
for physician-administered drugs and still not have met the DRAs 
rebate collection requirements. 
We could not determine the financial impact of collecting rebates for 
physician-administered drugs because of incomplete and 
potentially inaccurate data provided by States.  For the first and 
second quarters of 2009, the 26 States that provided complete rebate 
data reported recouping between 3 and 96 percent of the amount paid 
for physician-administered drugs by collecting rebates.  States also 
varied widely in the amount they reported spending on physician-
administered drugs and the percentage of rebates they reported 
requesting.  Although some variation among States rebate figures 
would be expected, this degree of variation calls into question the 
reliability and accuracy of the data provided.  For these reasons, we 
were unable to calculate the total rebate dollars all States collected and 
therefore could not determine the financial impact rebate collections 
had on reducing prescription drug expenditures. 
The 26 States that provided complete data reported paying $577 million 
for physician-administered drugs, requesting $148 million in rebates, 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  ii   
   
E X E C U T I V E   S U M M A R Y  
 
and collecting $112 million in rebates during the first and second 
quarters of 2009.  An additional 19 States, which reported paying 
approximately $355 million for physician-administered drugs in the 
first and second quarters of 2009, either could not provide data on the 
amount of rebates collected for physician-administered drugs or 
reported accuracy issues with the collections data that they provided.  
Three additional States did not provide rebate data because they had 
not invoiced manufacturers for the first half of 2009 rebates for 
physician-administered drugs.   
Twenty-nine States reported difficulties with nonpayment of the 
requested rebates for physician-administered drugs.  In total,        
29 States reported difficulties with manufacturer nonpayment of the 
rebates requested for physician-administered drugs.  These difficulties 
were attributed mainly to providers that entered incorrect NDC 
information (particularly the number of units billed) on claims for these 
drugs.  Manufacturers also questioned the validity of the NDCs or the 
number of units listed on the rebate invoices and requested additional 
information before making the rebate payments.  Seven States 
mentioned data issues with the CMS crosswalk file; several of these 
emphasized the need for a comprehensive, universal, and accurate 
crosswalk file for all States to use, specific only to rebateable physician-
administered drugs. 
Eighteen States reported that Medicare crossover claims (i.e., claims for 
beneficiaries who are eligible for both Medicare and Medicaid and for 
which Medicaid receives rebates even if it paid only a small portion of 
the claim) for physician-administered drugs do not typically include 
NDCs.  Without an NDC, a State would not be able to identify the 
appropriate manufacturer to bill for rebates and would not be able to 
collect rebates for these claims. 
Twelve States reported that certain manufacturers refused to pay 
rebates or consistently disputed requested payments.  For example, one 
State described a few manufacturers that have not responded to any 
rebate invoices. 
Thirty-one States had not implemented certain steps necessary for 
collecting rebates on all eligible physician-administered drugs 
purchased by 340B entities.  States may collect rebates for physician-
administered drugs when the 340B entity (i.e., an entity with statutory 
access to discounted drug prices) purchases the drug at the Medicaid 
rate (as opposed to the discounted 340B rate).  However, 31 States did 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  iii   
   
E X E C U T I V E   S U M M A R Y  
not have an edit to identify physician-administered drug claims 
submitted by 340B entities and/or did not require NDCs on 340B claims 
for physician-administered drugs eligible for rebates.  Without edits to 
identify the claim itself or an NDC to identify the correct manufacturer 
to invoice, it would have been very difficult, if not impossible, for States 
to collect the rebates. 
RECOMMENDATIONS 
The DRA mandated that States collect rebates for certain        
physician-administered drugs for Federal matching funds to be 
available.  According to States responses, the majority met the DRAs 
requirements as of June 2009; however, many States reported 
difficulties that would have prevented them from collecting all rebates 
owed for these drugs.  In a time when many States are experiencing 
financial difficulties, eliminating delays and inefficiencies with rebate 
collections could provide States with an additional source of funds in a 
timelier manner.  Although CMS has undertaken numerous steps to 
ensure that States comply with the DRAs requirements for these drugs, 
the findings of this report show that substantial issues remain and need 
to be addressed.  To assist in this, we recommend that CMS:  
Take action against States that do not meet the DRAs requirement 
to collect rebates on physician-administered drugs. 
Ensure that all State agencies are accurately identifying and 
collecting physician-administered drug rebates owed by 
manufacturers.   
Work with States to develop guidance for implementing edits that 
increase the efficiency of physician-administered drug claim 
reviews. 
Work with States to administer guidance to providers and    
Medicare contractors about the rebate requirements for     
physician-administered drugs.  
Ensure that the crosswalk file is complete, accurate, and identifies 
rebateable physician-administered drugs. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our first three recommendations.  In concurring, 
CMS stated that before taking any action against States, it needs to 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  iv   
   
E X E C U T I V E   S U M M A R Y  
learn more about the systemic problems preventing States from 
collecting rebates for physician-administered drugs.  CMS stated that it 
will reiterate the DRA rebate requirements in a release to States, as 
well as provide technical assistance.  CMS stated that if a State does not 
meet these rebate requirements, it may consider withholding Federal 
matching funds in the future, although the agency anticipates its 
additional assistance will make such actions unnecessary.   
CMS did not concur with our fourth recommendation, that it administer 
guidance to providers and Medicare contractors about the        
physician-administered drug rebate requirements.  The agency 
generally considers direct provider communication to be within the 
States purview and has therefore left this responsibility to them.  CMS 
maintains that Medicare contractors are aware of these requirements 
and have established procedures to accept NDCs on crossover claims.  
We have modified our original recommendation slightly to address 
CMSs statement that provider communication is the responsibility of 
the States.  However, because States reported that providers and 
Medicare contractors often did not provide or provided incorrect NDC 
information, we continue to believe that additional communication and 
education are warranted.   
CMS also did not concur with our fifth recommendation, that it ensure 
the accuracy and completeness of the crosswalk file, stating that the 
DRA's NDC requirements render this file unnecessary.  However, our 
findings show that the crosswalk file is still being relied upon by certain 
States, and we therefore continue to recommend that CMS ensure that 
States have access to a reliable crosswalk file. 
 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  v   
 T A B L E   O F   C O N T E N T S  
EX ECUT I VE  SUM M ARY  .....................................i 
 
 
I NT RO DU CT I O N  ............................................ 1 
 
 
F I NDI NG S  .................................................  13 
By June 2009, 73 percent of responding States reported             
meeting or exceeding the DRAs requirement to collect rebates          
for certain physician-administered drugs ....................  13 
We could not determine the financial impact of collecting rebates     
for physician-administered drugs because of incomplete and 
potentially inaccurate data provided by States ...............  14 
Twenty-nine States reported difficulties with nonpayment of the 
requested rebates for physician-administered drugs ...........  18 
Thirty-one States had not implemented certain steps necessary for 
collecting rebates on all eligible physician-administered drugs 
purchased by 340B entities ...............................  21 
 
RECO M M END AT I O N S  .....................................  23 
Agency Comments and Office of Inspector General Response ....  26 
 
APP EN DI X ES  .............................................  28 
A:   Detailed Description of the Medicaid Drug Rebate                 
Calculation .........................................  28 
B:   State Responses About the Deficit Reduction Act                           
of 2005 Requirements for Physician-Administered                   
Drugs  .............................................  30 
C:   Physician-Administered Drug Data Reported by States for          
the First Half of 2009 ................................  34 
D:   Agency Comments ...................................  39 
     
ACKNO WL E DG M E N T S .....................................  43   
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To determine the number of States that met Federal requirements 
for the collection of rebates for certain physician-administered 
drugs by June 30, 2009. 
2.  To estimate the dollar amount of rebates that States requested and 
collected from manufacturers for all physician-administered drugs 
in the first and second quarters of 2009. 
3.  To identify issues that prevented States from collecting rebates for 
all physician-administered drugs that were requested from and/or 
owed by manufacturers in the first and second quarters of 2009. 
BACKGROUND 
In general, drug manufacturers are required to pay rebates to States 
for drugs covered under their Medicaid programs.  Although this 
requirement has always included rebates for physician-administered 
drugs, a prior Office of Inspector General (OIG) report found that only 
17 States collected Medicaid rebates from manufacturers for 
physician-administered drugs in 2001.1  At that time, many States did 
not have a system to identify the manufacturer responsible for paying 
the rebates for these drugs.  In that report, we also found that the 
savings from rebates in 1 year can exceed the one-time cost of 
implementing the system changes necessary to collect rebates. 
Following the release of that OIG report, the Deficit Reduction Act of 
2005 (DRA), P.L. 109-171, was passed.  It specifically required States 
to collect rebates for certain physician-administered drugs for Federal 
financial participation (FFP)2 to be available.3  To assist in meeting 
this requirement, the DRA also mandated that claims for              
certain physician-administered drugs include the national drug code 
(NDC) for each drug.  The NDC is an 11-digit numeric code, which is 
divided into three segments identifying (1) the firm that 
manufactures, distributes, or repackages the drug; (2) the specific 
 
1 OIG, Medicaid Rebates for Physician-Administered Drugs (OEI-03-02-00660), April 
2004. 
2 FFP refers to matching funds provided to States by the Federal Government for 
certain social services, including Medicaid. 
3 Section 1927(a)(7) of the Social Security Act (the Act), as added by section 6002 of the 
DRA. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  1   
   
I N T R O D U C T I O N  
strength, dosage form, and formulation of the product for a particular 
firm; and (3) the products package size.  By implementing the DRAs 
requirement to include the NDC, States could identify and invoice the 
manufacturers responsible for paying rebates.  The Centers for 
Medicare & Medicaid Services (CMS) estimated that by implementing 
the DRA rebate provisions, States could potentially reduce 
prescription drug expenditures by $179 million between 2007 and 
2011.4  To assist States with the implementation, CMS sent letters to 
State Medicaid Directors, released news flashes, and followed up with 
States to offer technical support and encourage readiness.   
Medicaid Drug Rebate Program 
Currently, all 50 States and the District of Columbia offer prescription 
drug coverage as part of their Medicaid benefit packages.  In 2009, 
Medicaid expenditures for prescription drugs totaled $26 billion.5  
Congress created the Medicaid drug rebate program to reduce State 
and Federal Medicaid expenditures for prescription drugs.6  For FFP 
to be available for covered outpatient drugs provided under Medicaid, 
manufacturers are required to enter into rebate agreements with the 
Secretary of Health & Human Services (the Secretary) and pay 
quarterly rebates to State Medicaid agencies.7  As of April 2010,         
49 States and the District of Columbia,8 and approximately              
550 pharmaceutical companies, participated in the rebate program. 
Medicaid Drug Rebate Process 
Using pricing data submitted by manufacturers each quarter, CMS 
calculates a unit rebate amount (URA) for NDCs included in the 
rebate program (see Appendix A for a detailed description of the rebate 
calculation).  After calculating URAs for all NDCs, CMS provides the 
amounts to State Medicaid agencies.  Within 60 days after the end of 
the quarter, each State Medicaid agency then sends each 
manufacturer an invoice with information such as the number of units 
 
4 71 Fed. Reg. 77174, 77190 (Dec. 22, 2006).  
5 This was the most recent year for which complete expenditure data were available. 
6 The Omnibus Budget Reconciliation Act of 1990,  4401, codified at                            
42 U.S.C.  1396r-8. 
7 Sections 1927(a)(1) and (b)(1) of the Act. 
8 Hereinafter referred to as States.  Arizona currently does not participate in the rebate 
program, as it was granted a section 1115 waiver that allows it to provide outpatient 
drugs through managed care organizations that do not meet certain requirements of the 
Act. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  2   
   
I N T R O D U C T I O N    
reimbursed for each of its NDCs in the State and these reimbursed 
NDCs URAs.  To determine the total rebates due from the 
manufacturer, URAs are multiplied by the total number of units of 
each NDC for which the States reimbursed providers during the 
quarter.  The manufacturer processes the invoice and pays the rebate 
to the State within 37 days of the invoices postmark date, after which 
interest begins to accrue (see Figure 1 for a depiction of the rebate 
process).9 
 
 
Figure 1:  Medicaid Drug Rebate Process 
 
   
Manufa cturer    1.  Average Manufacturer Price/Best Price Data  CMS 
 
2. Calculated Unit 
 
4. Rebate  Rebate 
3. Rebate  Amount 
 
Invoice With 
Utilization Data 
 
 
    
State Medicaid 
Agency 
 
 
 
Rebate exception for 340B entities.  Section 340B of the Public Health 
Service Act established the 340B Drug Pricing Program, which 
requires pharmaceutical manufacturers to enter into an agreement to 
charge at or below the statutorily defined prices for sales to certain 
qualified entities.10  Drug purchases that qualify for discounted 340B 
rates are not subject to a Medicaid rebate because this would result in 
duplicate discounts from manufacturers.   
 
9 A manufacturer may dispute the accuracy of the invoice submitted by the State.  To 
address the problem of unpaid and disputed rebates, CMS implemented the Medicaid 
Drug Rebate Dispute Resolution program.  Through this program, CMS provides 
mediation and clarification to assist manufacturers and States in identifying and 
resolving Medicaid drug rebate disputes.  
10 Qualified entities include Ryan White grantees and disproportionate share hospitals, 
among others.  The statutory requirements of the 340B Drug Pricing Program are set 
forth in 42 U.S.C.  256b. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  3   
   
I N T R O D U C T I O N  
However, in some cases, a 340B entity may choose to purchase         
off 340B contract and bill the State at the regular Medicaid rate 
instead of the discounted rate.  The State would then invoice 
manufacturers for rebates for these drugs.11    
   Medicaid Rebates for Physician-Administered Drugs  
Drugs covered under Medicaid are typically self-administered products 
dispensed by pharmacies.  However, physician-administered drugs are 
also covered under the rebate program.12  Physician-administered 
drugs include both injectable and noninjectable drugs and are typically 
administered by medical professionals in physicians offices, clinics, or 
hospitals.  In 2009, Medicaid spent approximately $4 billion on 
physician-administered drugs.13  Single-source drugs (i.e., brand-name 
drugs) accounted for a substantial majority of this spending (over       
90 percent).14   
Rebate collections for physician-administered drugs prior to the DRAs 
requirements.  Manufacturers with signed rebate agreements are 
required to pay rebates to States for covered outpatient drugs.15  Even 
though this requirement has always included physician-administered 
drugs, before provisions of the DRA were implemented, many States 
could not always determine the manufacturer responsible for paying 
the rebates and therefore had difficulty collecting the rebates that 
were owed.16  
At this time, physicians and institutions often submitted claims for 
drugs to State Medicaid agencies using codes from the Healthcare 
Common Procedure Coding System (HCPCS) (in contrast to pharmacy 
claims, which list NDCs).17, 18  Unlike the NDC, the HCPCS code does 
not identify the manufacturer responsible for paying a rebate.  States 
 
11 CMS, Dispute Resolution  Best Practices Suggestions for Resolving 340B-Related 
Disputes.  Accessed at http://www.cms.gov on August 24, 2010. 
12 Sections 1927(k)(2) and (a)(7) of the Act (as added by the DRA).  
13 CMS, State Drug Utilization Data.  Accessed at http://www.cms.gov on                  
July 26, 2010.  
14 Ibid. 
15 Vaccines are exempt from the rebate requirement. 
16 71 Fed. Reg. 77174, 77188 (Dec. 22, 2006).    
17 OIG, Medicaid Rebates for Physician-Administered Drugs (OEI-03-02-00660),    
April 2004.  
18 A HCPCS code identifies the drugs name, route of administration, and dosage size, 
but does not identify the manufacturer or package size. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  4   
   
I N T R O D U C T I O N    
that were billed using only HCPCS codes for single-source drugs could 
generally link the codes to NDCs using CMSs crosswalk file because 
most HCPCS codes for these drugs include only NDCs from one 
manufacturer.19  However, if a State was billed with a HCPCS code for 
a multiple-source drug, identifying the manufacturer was difficult, as 
a single HCPCS code may represent drugs from more than one 
manufacturer.20 
Rebate collections for physician-administered drugs after the DRAs 
requirements.  The DRA specifically requires States to provide for the 
collection of rebates from manufacturers for all single-source and 
certain multiple-source, physician-administered drugs for Federal 
matching funds to be available to the States.  To that end, effective 
January 1, 2006, States must provide for the collection and submission 
of utilization data for all single-source, physician-administered 
drugs.21  As of January 1, 2008, States must also provide for the 
collection and submission of similar data for the 20 multiple-source,              
physician-administered drugs with the highest Medicaid dollar 
volume.22  No later than January 1, 2007, the Secretary was required 
to publish the list of the 20 highest dollar volume multiple-source, 
physician-administered drugs and may modify the list yearly as drug 
volumes change.23  This list was most recently updated in         
January 2011 and, for each of the 20 multiple-source drugs, contains 
the corresponding HCPCS code, the drugs description, the HCPCS 
dosage, the drug name, any associated NDCs, and the manufacturer 
name.   
To assist in meeting the DRA rebate collection requirements, as of 
January 1, 2007, claims for all single-source, physician-administered 
drugs and the 20 multiple-source, physician-administered drugs with 
the highest dollar volume are required to include NDCs.24, 25  The new 
 
19 CMS creates a quarterly crosswalk file that links drug HCPCS codes to their 
applicable NDCs. 
20 A drug from one manufacturer can have more than one NDC, but the HCPCS (and 
therefore all of its associated NDCs) for this drug would only apply to one manufacturer. 
21 Section 1927(a)(7)(A) of the Act. 
22 Sections 1927(a)(7)(B)(i) and (ii) of the Act. 
23 Section 1927(a)(7)(B)(i) of the Act. 
24 Section 1927(a)(7)(C) of the Act. 
25 The Secretary may designate an alternative coding system, although only NDCs 
have been specified to date. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  5   
   
I N T R O D U C T I O N  
NDC requirement also applies to claims for dual-eligible beneficiaries 
(i.e., beneficiaries who qualify for Medicare and Medicaid).  Medicare 
providers billing for dual-eligible beneficiaries are required to enter 
the NDC and the drug quantity on claims for physician-administered 
drugs.26  Medicare providers submit these claims to Medicare 
contractors, which then transfer the NDC information to Medicaid for 
the billing of Medicaid rebates (referred to as a crossover claim).  By 
including the NDC information on crossover claims, States can 
identify manufacturers to bill for Medicaid rebates, where applicable.  
This enables Medicaid to receive rebates on a crossover claim, even if 
it paid only a small portion of the claim. 
CMS Actions To Assist States in Meeting the DRA Rebate Requirements 
Since the passage of the DRA, CMS has completed numerous actions 
aimed at ensuring that States meet the new rebate requirements for 
physician-administered drugs.  In preparation for implementing the 
DRA provisions, CMS sent a letter to all State Medicaid Directors on 
July 11, 2006.27  This letter introduced States to the new procedures 
regarding State collection and submission of data for the purpose of 
collecting Medicaid rebates for physician-administered drugs from 
manufacturers. 
The July 2006 letter also informed States that CMS would be willing 
to grant extensions if the States needed more time to implement the 
new requirements regarding the collection and submission of data.28  
Thirty-six States requested and received extensions.  Even allowing 
for these extensions, all States should have been in compliance with 
the DRA requirements no later than July 1, 2008.  Prior to this date, 
CMS followed up with States through surveys and phone calls to offer 
technical assistance and support and to encourage readiness among 
States.29   
 
26 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, Transmittal 1401.  
27 CMS, Letter to State Medicaid Directors, SMDL Number 06-016.  Accessed at 
http://www.cms.gov on January 6, 2011. 
28 To prevent hardship to States, section 1927(a)(7)(D) of the Act allowed the Secretary 
to delay implementation for the States that needed additional time to meet the DRA 
requirements. 
29 Before the extensions expired, CMS surveyed States to determine their progress 
with meeting the DRA requirements.  CMS asked questions such as whether the 
necessary system changes to capture NDCs and bill manufacturers for rebates were 
completed and whether providers were notified of the NDC requirement. 
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I  N T R O D U C T I O N    
Furthermore, to address the need for rebates on claims submitted for 
dual-eligible beneficiaries, CMS developed a method to capture NDCs 
on crossover claims.  CMS informed Medicare providers that they were 
responsible for submitting NDCs on crossover claims in addition to 
HCPCS codes.  CMS published news flashes to make the involved 
parties aware of this requirement.30 
Previous OIG Work  
The April 2004 OIG report entitled Medicaid Rebates for       
Physician-Administered Drugs (OEI-03-02-00660) reported that        
31 States did not collect any rebates for physician-administered   
drugs; 14 States collected rebates on only single-source,          
physician-administered drugs; and 3 States collected rebates on both          
single-source and multiple-source, physician-administered drugs in 
2001.31  If all States had collected rebates for all single-source and 
certain multiple-source, physician-administered drugs,32 Federal and 
State Medicaid expenditures could have been reduced by $37 million 
during that year.  OIG recommended that CMS encourage rebate 
collection for physician-administered drugs among all States and that 
CMS encourage States to share information that would facilitate 
rebate collection.  CMS concurred with our recommendation; however, 
the agency disagreed with our estimated savings figure.33  Subsequent 
to that report, the DRA imposed the rebate requirements for 
physician-administered drugs. 
A July 2005 OIG report entitled Multistate Review of Medicaid Drug 
Rebate Programs (A-06-03-00048) audited States accountability and 
internal controls over their Medicaid drug rebate programs.  We found 
that only four States had no weaknesses in accountability and internal  
 
30 For example, see CMS, MLN Matters Number MM5950.  Accessed at 
http://www.cms.gov on January 6, 2011. 
31 This report collected data from 49 States (the District of Columbia is defined as a 
State in this report; Arizona and Tennessee did not participate in the rebate program 
during the time of this review).  Forty-eight States provided responses to our questions 
and most States provided all or some of the requested financial data. 
32 Potential rebates for multiple-source drugs were estimated for only the top                 
40 multiple-source, physician-administered drugs with the highest Medicaid payments in 
2001. 
33 CMS noted that the estimated savings did not take into account States which had 
improved their rebate collection processes since our surveys were conducted. 
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I N T R O D U C T I O N  
controls.34  Additionally, CMS did not have reliable information to 
properly monitor the drug rebate program.  We recommended that 
CMS continue to emphasize the requirement that States submit 
accurate and reliable information and emphasize billing and collection 
of drug rebates as a high priority.  CMS concurred with our 
recommendations. 
METHODOLOGY 
Data Collection 
In October 2009, we sent data requests and surveys to the 50 States 
participating in the Medicaid drug rebate program.35  We received      
48 responses to the data request36 and 49 responses to the survey.37   
Data requests.  We requested that State Medicaid agencies provide us 
with the following data for all physician-administered drugs38 paid for 
by the State in the first and second quarters of 2009: 
  drug code (e.g., NDC, HCPCS); 
  total number of units paid for by the State for each code; 
  total dollars paid by the State for each code; 
  total rebate amount the State requested (if any) from the 
manufacturer for each code; and 
  total rebate amount the State collected for each code. 
Although 48 States responded to our data request, only 26 were able to 
provide all of the requested data (i.e., the total dollars paid, the total 
rebate amount requested, and the total rebate amount collected).  The 
 
34 Specifically, this report documented problems with unreliable information submitted 
to CMS on the Medicaid Drug Rebate Schedule in 37 States, improper accounting 
procedures for interest on late rebate payments in 27 States, inadequate rebate collection 
systems in 17 States, inadequate dispute resolution and collection processes for 15 States, 
and other significant problems in 13 States (States could be counted in more than              
1 category).  
35 In November, we sent second request letters to States that had not responded to the 
first request.  We then followed up with nonresponding States between December 2009 
and April 2010. 
36 Hawaii and Pennsylvania reported that they were unable to provide any of the 
requested data.   
37 We did not receive a survey from Ohio (but the State did provide data).   
38 We provided each State with CMSs definition of a physician-administered drug, 
consistent with section 1927(k)(2) of the Act. 
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remaining 22 States provided partial data or did not have any rebate 
data to report.  In such cases, we analyzed the limited data that the 
States were able to provide.  In general, States reported that they 
could not provide the data because they could not differentiate 
between rebates collected specifically for physician-administered drugs 
and rebates collected for other drugs covered under Medicaid.  See 
Table 1 for the overall number of States that provided each type of 
data. 
       Table 1:  Number of States Included in Rebate Calculations 
Data  Number of States  Number of States 
That Provided  That Did Not 
Data  Provide Data 
The amount paid for physician-administered drugs  45  3 
The amount paid and the amount of rebates requested for  37  11* 
physician-administered drugs 
The amount paid, the amount of rebates requested, and the  26  22 
amount of rebates collected for physician-administered drugs 
Source:  OIG analysis of State responses to the data request, 2010. 
            * One State was able to provide the amount of rebates requested, but not the amount paid. 
            
Surveys.  We requested that States complete electronic surveys about 
the policies, procedures, and controls used to process rebates for 
physician-administered drugs.  We asked States to answer questions 
regarding their compliance with the DRAs requirements for 
physician-administered drugs as of the end of the second quarter of 
2009.  For example, we asked State Medicaid agencies to identify the 
types of drugs for which they collected rebates (e.g., all          
physician-administered drugs, certain physician-administered drugs, 
or no physician-administered drugs) and indicate when they required 
providers to include NDCs on professional and institutional                   
physician-administered drug claims for single-source and           
multiple-source drugs.39  For the States that required providers to 
include NDCs on physician-administered drug claims, we asked what 
changes (if any) the States made to their claims-processing systems to 
enable the use of NDCs, what costs they incurred (if any) to 
 
39 Claims submitted directly by physicians are referred to as professional claims; 
claims submitted by institutions (e.g., hospital outpatient centers) are referred to as 
institutional claims.  
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implement system updates, and whether the States denied claims 
without NDCs.   
We also asked States to describe any difficulties with collecting 
physician-administered drug rebates.  In addition, we asked States to 
answer questions about their claims review processes for physician-
administered drugs, particularly with crossover claims and claims 
submitted by 340B entities.  
Data Analysis 
DRAs requirements for rebate collection of physician-administered drugs.  
We identified the number of States that reported (1) meeting             
the DRAs rebate collection requirement (i.e., collected rebates on            
all single-source, physician-administered drugs and the                          
20 multiple-source, physician-administered drugs with the highest 
dollar volume); (2) exceeding the DRAs rebate collection requirement 
(i.e., collected rebates on all physician-administered drugs); or (3) not 
meeting the DRAs rebate collection requirement (i.e., did not collect 
rebates or collected rebates for only some of the required drugs).40  If a 
State reported that it collected rebates in a manner that met or 
exceeded the DRAs rebate requirement, but also reported that it did 
not deny claims for drugs without NDCs (i.e., claims would be paid for 
a drug without enough information to invoice the manufacturer 
responsible for the rebate), we considered that State to not meet the 
DRAs rebate requirement.41   
Using the dates States reported that they began enforcing the NDC 
requirement, we calculated the number of States that reported 
requiring NDCs for single-source and multiple-source,            
physician-administered drug claims by June 30, 2009.  We also 
calculated the average reported cost to implement system changes to 
 
40 Two States reported that they collected rebates in a manner that met or  
exceeded the DRAs rebate requirement (i.e., reported collecting rebates for all                    
physician-administered drugs and would deny claims without NDCs), but that they had 
not yet invoiced for rebates pertaining to the first half of 2009.  Because both States had 
collected rebates for physician-administered drugs prior to 2009, we considered them in 
compliance with the DRAs rebate requirements.  
41 States were required to comply with the DRAs rebate provisions for FFP to be 
available for physician-administered drugs.  Therefore, a State could have technically met 
the DRA requirements if it did not deny drug claims that failed to include NDC 
information as long as no FFP was requested.  However, because none of the States in 
question reported not seeking FFP for physician-administered drugs, we concluded that 
these States did not meet the DRA requirements. 
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I N T R O D U C T I O N  
enable NDC collection.  We then determined from the surveys what 
these changes entailed.   
Dollar amount of rebates requested and collected.  Although 48 States 
responded to our data request, only 26 provided complete information 
on the amount of rebates requested and collected for               
physician-administered drugs.  For each of the 26 States, we summed 
the total amount reimbursed, the total amount of rebates requested, 
and the total amount of rebates collected for all drug codes for the first 
and second quarters of 2009.  We then summed this information from 
all 26 States to calculate overall figures for the first half of 2009.   
Of the remaining 22 States that responded to our data request,          
19 were unable to determine the amount of rebates collected.  To 
identify the reasons collections data were not provided, we reviewed 
information provided by these 19 States and followed up via telephone 
or email with States when clarification was necessary.  Although we 
were unable to calculate the rebates collected by these 19 States, we 
summed the data provided by these States for the amount reimbursed 
(16 States) and rebates requested (12 States).   
The remaining 3 of the 22 States reported that they had neither 
requested nor collected any rebates for the first and second quarters of 
2009.  We summed the total amount reimbursed by these three States 
for physician-administered drugs. 
States difficulties with collecting all physician-administered drug rebates.  We 
determined the number of States that reported difficulties with       
nonpayment of all the rebates requested for physician-administered 
drugs.  We also reviewed States descriptions of any other issues with 
collecting rebates.  To identify common problems that States had, we 
determined the number of States that provided similar descriptions of 
issues with manufacturers and providers. 
We evaluated States responses to questions pertaining to the     
review of 340B claims and Medicare crossover claims for        
physician-administered drugs and identified circumstances in which 
the State may not have collected all possible rebates for these claim 
types.  We determined the number of States that did not typically 
receive NDCs on Medicare crossover claims.  We also determined the 
number of States that had edits to prevent manufacturers from paying 
duplicate discounts on 340B claims and the number of States with 
edits to enable rebate collection for eligible physician-administered 
drug claims submitted by 340B entities. 
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Limitations 
As previously mentioned, we received complete data from only           
26 States.  The data provided by these States may not be 
representative of the amount of rebates requested and collected for the 
States with missing data. 
The remaining 24 States were unable to provide any or all of the 
requested data (19 provided a portion of the requested data, 3 had not 
invoiced manufacturers for rebates for the first and second quarters of 
2009, and 2 responded that they were unable to provide any of the 
requested data).  However, we did receive complete surveys from these 
24 States.   
The findings presented are based on self-reported data and survey 
responses provided by State Medicaid agencies.  Even though we 
contacted States to clarify their responses to specific questions, we did 
not verify the accuracy of all data and survey responses provided by 
each State.   
Standards 
This study was conducted in accordance with the Quality Standards 
for Inspection and Evaluation issued by the Council of the Inspectors 
General on Integrity and Efficiency. 
 
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By June 2009, 73 percent of responding States  As of June 30, 2009, 36 of the     
reported meeting or exceeding the DRAs  49 responding States (73 percent) 
reported being in full     
requirement to collect rebates for certain 
compliance with the DRAs 
physician-administered drugs   
requirement to collect rebates    
for all single-source, physician-administered drugs and the                 
20 multiple-source, physician-administered drugs with the          
highest dollar volume.  Thirty-one of these States reported      
exceeding the DRAs requirements by collecting rebates on all                 
physician-administered drugs.42 
Table 2:  State-Reported Compliance With DRA Rebate Requirements 
as of June 2009 
     
Rebates Collected  Number of States 
 
All physician-administered drugs  31 
 
All single -source and the top 20 multiple-source, physician-administered drugs  5 
Some ph ysician-administered drugs, but did not meet the DRAs requirement  12 
Did not c ollect any rebates for physician-administered drugs  1 
 Source:  OIG analysis of State responses to survey question, 2010. 
 
Among the 13 States that reported not collecting rebates in accordance 
with the DRAs rebate requirements, only the District of Columbia 
stated that it did not collect any rebates for physician-administered 
drugs.43  The remaining 12 States reportedly collected rebates on a 
subset of physician-administered drugs (e.g., only rebates for 
professional claims, only rebates for single-source drugs), but were not 
 
42 However, two States that reported collecting rebates for all physician-administered 
drugs had not invoiced manufacturers for first- and second-quarter 2009 rebates at the 
time of our data request.  Both States reported that they plan to invoice manufacturers 
for these rebates at a later time and had collected rebates prior to 2009.  
43 We estimate that the District of Columbia could have reduced its                 
physician-administered drug expenditures by at least 25 percent (estimated minimum 
savings of $255,000 during the first and second quarters of 2009) had it collected rebates 
for all physician-administered drugs in the first half of 2009.  Because of limitations in 
the data submitted by the States, we were unable to calculate potential savings for the 
remaining 12 States that did not fully meet the DRAs rebate collection requirements. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  13   
   
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in full compliance with the DRA requirements.44  See Table 2 for an 
overall description and Appendix B for a detailed description of States 
collection of rebates for physician-administered drugs as of June 2009. 
As of June 2009, 86 percent of responding States reported meeting the 
DRAs requirement to collect NDCs on physician-administered drug claims  
To facilitate rebate collection, the DRA also required States to collect 
NDCs on claims for certain physician-administered drugs.  By       
June 30, 2009, 42 of the 49 responding States (86 percent) reported 
that they required NDCs on all claims for physician-administered 
drugs.45  See Appendix B for a detailed description of States NDC 
requirements as of June 2009.     
On average, States reported spending $540,000 to implement the changes 
necessary to collect NDCs for physician-administered drugs 
The States costs to implement the necessary system changes to collect 
NDC information averaged $540,000 (costs ranged from $0 to             
$4 million).46  States reported that these changes included updating 
States claim systems to accept NDC codes, creating new edits to deny 
claims billed without NDCs or with invalid NDCs, educating providers 
about the NDC requirement, and maintaining a list of HCPCS codes 
and NDCs (including a crosswalk).  
In total, 26 States provided 
We could not determine the financial impact of 
complete data on the amount of 
collecting rebates for physician-administered 
rebates requested and collected 
drugs because of incomplete and potentially  for physician-administered drugs 
inaccurate data provided by States  in the first and second quarters 
of 2009.  An additional 19 States 
were either unable to provide complete rebate collections data or 
reported accuracy issues with the data provided.  Finally, three      
more States had not invoiced manufacturers for rebates for             
physician-administered drugs at the time of our request.  In many 
cases, there was substantial variability among the data provided by 
 
44 According to the States responses, 3 of the 12 were or planned to be in full 
compliance with the DRAs rebate requirement by the end of 2009, and an additional 4 of 
the 12 reported plans to meet the requirements in 2010 or 2011.  
45 Six of the 42 States that required NDCs did not otherwise meet the DRAs rebate 
collection requirements.  
46 Twenty-nine States were able to calculate and provide cost estimates.  One of these 
States reported that it makes continuous payments of approximately $1,700 per quarter 
to update its system to collect NDCs.  This State was not included in the average.   
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  14   
   
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responding States, casting doubts about their accuracy and reliability.  
For these reasons, we were unable to calculate the total rebate dollars 
all States collected and therefore could not determine the financial 
impact rebate collections had on reducing prescription drug 
expenditures. 
States reported recouping between 3 and 96 percent of the amount paid 
for physician-administered drugs by collecting rebates  
The reimbursement and rebate data reported for                     
physician-administered drugs varied greatly among States.  In fact, 
the 26 States that provided rebate collections data reported recouping 
between 3 and 96 percent of the amount paid for these drugs in the 
first half of 2009 by collecting rebates.  States also varied widely in the 
amount that they reported spending on drugs.  The 45 States that 
provided reimbursement data reported paying between $503,000 and 
$162 million for physician-administered drugs in the first and second 
quarters of 2009.  See Appendix C for the total amount reimbursed, 
rebates requested, and rebates collected, as reported by all responding 
States. 
The percentage of reimbursement that States reported requesting in 
rebates also varied widely.  Seven States reported requesting in 
rebates more than half of their total payments for physician-
administered drugs (one of these States requested almost three times 
as much as it paid).  However, another seven States reported 
requesting rebates that represented less than 10 percent of total 
payments.   
Although some variation among States rebate figures would be 
expected, this degree of variation calls into question the accuracy of 
the data provided.  In particular, variations did not relate to the size of 
the State or the amount the State reported paying for             
physician-administered drugs in the first and second quarters of   
2009.47  For example, California requested $9.5 million in                
physician-administered drug rebates for this period, even though it 
reported paying $162 million for these drugs.48  Smaller States, such 
as Tennessee and Wisconsin, paid significantly less for            
 
47 The amount of rebates that should be requested by each State is determined by a 
statutorily defined formula.  
48 This State reported that it did not collect rebates for multiple-source,           
physician-administered drugs in the first quarter of 2009. 
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F I N D I N G S  
physician-administered drugs, but requested more than double the 
dollar amount California requested in rebates.  In another example, 
when we requested data for an earlier study, Maryland reported 
paying $25 million for physician-administered drugs in 2001.  In 
contrast, as part of our current study, Maryland reported paying 
$503,000 for physician-administered drugs in the first half of 2009.49 
Because it was beyond the scope of this study to verify the data 
provided by States, we were not able to determine whether these 
variations are a result of incorrect data or whether the amounts 
provided are in fact correct.   
Twenty-six States reported collecting $112 million in                      
physician-administered drug rebates for the first half of 2009 
In total, 26 States provided complete data on the amount paid and the 
amount of rebates requested and collected in the first and second 
quarters of 2009.  The 26 States reported paying $577 million for 
physician-administered drugs and requesting $148 million in rebates 
from manufacturers during that period.  Based on the data      
provided, these States collected $112 million in rebates for     
physician-administered drugs in the first and second quarters of 2009, 
resulting in an overall collection rate of 75 percent and representing  
19 percent of their total payments for physician-administered drugs.  
(Refer to Table 3 and Table C-1 in Appendix C for information about 
overall and individual States rebate collections, respectively.)   
Nineteen States either could not provide data on the amount of rebates 
collected for physician-administered drugs or reported accuracy issues 
with the collections data they provided   
An additional 19 States stated that they were unable to provide 
complete and/or reliable information about the total rebate dollars 
collected from drug manufacturers for physician-administered drugs.50  
Among these 19 States, 13 States provided no rebate collections data 
on physician-administered drugs because they could not differentiate 
between rebates collected for these drugs and rebates collected for  
 
 
49 See OEI-03-02-00660 for Marylands reported reimbursement for                 
physician-administered drugs in 2001. 
50 Even though specific rebate figures were not provided, six States provided 
assumptions for the percentage of rebates collected.  These assumptions are provided in 
Table C-2 of Appendix C.   
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other drugs covered under Medicaid,51 3 States noted accuracy issues 
with the data they provided,52 1 State reported that it documented 
only a portion of the rebates collected, 1 State reported that it did not 
document any of the rebates collected, and 1 State could not readily 
determine rebates collected.   
These 19 States reported paying approximately $355 million for 
physician-administered drugs in the first and second quarters of 
2009.53  Even though the amount of rebates received was not provided, 
12 of the 19 States could determine the amount of rebates requested 
for physician-administered drugs.  These 12 States requested           
$57 million in rebates for physician-administered drugs for that 
period.  Refer to Table 3 and Table C-2 in Appendix C for overall and 
individual rebate data for these States, respectively.  
Table 3:  Physician-Administered Drug Data Provided by States for the First     
and Second Quarters of 2009 
Data Provided by States  Amount Reimbursed   Amount of Rebates          Amount of Rebates 
Requested  Collected 
States with complete 
rebate data (n=26)  $577,174,377  $148,448,829  $112,066,822 
States with incomplete 
rebate data (n=19)  $354,597,303*  $56,982,977**  Could not determine 
States that did not invoice for rebates 
(n=3)  $51,957,878  $0  $0 
     Total based on data provided  $983,729,558*  $205,431,806**  $112,066,822 
Source:  OIG analysis of State data, 2010. 
* Three States were unable to provide the amount reimbursed for physician-administered drugs and therefore were not included in this total. 
** Seven States were unable to provide the amount of rebates requested for physician-administered drugs and therefore were not included in 
this total. 
 
51 Two additional States, Pennsylvania and Hawaii, were not included in the data 
portion of the analysis because they did not provide any of the requested data (i.e., the 
amount reimbursed, the amount of rebates requested, and the amount of rebates 
received).  Both States reported that they did not have the ability to determine any data 
specifically for physician-administered drugs. 
52 For example, States reported that there were incorrect unit conversions in the 
amounts invoiced to manufacturers or reported that the data did not account for any 
adjustments made as a result of manufacturer disputes over the rebate amount invoiced 
(most likely, from inaccurate unit conversions).  A manufacturer that questions the 
accuracy of the States rebate invoice may either pay for the disputed units and work with 
the State to resolve the issue or withhold payment until the issue is resolved.   
53 This amount would be higher, but 3 of the 19 States were unable to provide the 
amount reimbursed for physician-administered drugs.   
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Three States did not provide rebate data because they had not invoiced 
manufacturers for first half of 2009 rebates for physician-administered 
drugs  
Two States that reported that they collected rebates for all    
physician-administered drugs never sent invoices to manufacturers for 
rebates pertaining to utilization in the first and second quarters of 
2009 because of computer issues.  These States had therefore not 
requested or collected rebates for physician-administered drugs at the 
time of our data request.  These two States paid $51 million for 
physician-administered drugs for the period under review.  Both 
States reported that they collected rebates for such drugs prior to 2009 
and that they plan to invoice for the rebates covered under the first 
and second quarters of 2009.   
Additionally, as previously mentioned, the District of Columbia 
reported not collecting any rebates for physician-administered drugs 
and therefore did not have any rebate data to report.  In the first and 
second quarters of 2009, the District of Columbia paid $999,000 for 
these drugs.  Refer to Table 3 and Table C-3 in Appendix C for overall 
and individual rebate data for these States, respectively.  
 
In total, 29 of 48 States54 
Twenty-nine States reported difficulties with 
reported difficulties with 
nonpayment of the requested rebates for 
manufacturer nonpayment of 
physician-administered drugs 
all of the rebates requested for 
  physician-administered drugs.  
Many difficulties involved potentially incorrect or missing NDC 
information on the claims submitted by providers.  This would 
frequently lead manufacturers to dispute the amounts States 
requested on rebate invoices, including the amounts requested for 
crossover claims (claims that Medicare contractors transfer to 
Medicaid).55  Other issues, however, involved more general problems 
with certain manufacturers. 
 
54 Although we received surveys from 49 States, the District of Columbia reported not 
collecting rebates and was therefore exempt from answering the survey questions 
pertaining to difficulties with rebate collections.  
55 Crossover claims are those for beneficiaries who are eligible for both Medicare and 
Medicaid and for which Medicaid receives rebates even if it paid only a small portion of 
the claims. 
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Twenty-one States reported provider or manufacturer issues with the 
accuracy of the NDC information included on physician-administered 
drug claims 
Traditionally, providers billed for physician-administered drugs using 
HCPCS codes rather than NDCs.  Even though Medicaid payment for 
a physician-administered drug claim is usually based on the HCPCS 
code, the NDC is used for rebate processing, and therefore providers 
typically need to include both codes on the claim for payment and 
rebate collection.  In many cases, the billing unit for an identical 
quantity (e.g., 1,000 milligrams versus 1 gram) of a drug differs 
between the two code types.   
As a result, 21 States reported issues with the NDC information on the 
claim, such as providers that inaccurately converted HCPCS code 
units to NDC units, providers that listed NDCs that did not 
correspond to the same drug as the HCPCS code, and manufacturers 
that questioned the validity of the NDC information on the rebate 
invoice.  Two States mentioned that even though they had held 
training sessions and made one-on-one educational calls, providers 
continued to incorrectly report NDCs and the corresponding units.56     
Because States invoice manufacturers for rebates based on the 
number of units billed, inaccurate conversions may cause States to 
request substantially more or less than they are actually owed.  This 
could be a factor contributing to the significant variations among the 
data reported by States.  Among the 29 States that reported 
difficulties with manufacturer nonpayment of rebates, 16 stated that 
manufacturers questioned the validity of the NDC information, 
questioned the conversions for the number of NDC units listed on the 
invoice, or requested additional information to support the utilization 
invoiced before making the rebate payments.  In addition, a few of 
these States also reported that verifying unit conversions can be 
extremely time consuming and that this had sometimes delayed the 
collection of rebates.   
Seven States mentioned data issues with the CMS crosswalk file.  
CMS maintains a file that crosswalks a drugs HCPCS code to the 
 
56 Additional States may have offered training to providers; however, we did not 
specifically ask States to describe these efforts.  States were included in this count if they 
mentioned provider training when asked to generally describe issues with claims reviews 
and rebate collections. 
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corresponding NDC.  However, a few of these States reported that 
CMSs currently available crosswalk file and the drug compendia   
(e.g., First DataBank) that States use to obtain drug information 
contain inaccuracies and omissions.  Several States emphasized the 
need for a comprehensive, universal, and accurate crosswalk file for all 
States to use, specific only to rebateable physician-administered 
drugs.57  This could improve the efficiency of rebate collections by 
assisting States in tasks such as claim validation and unit-of-measure 
conversions.   
Eighteen States reported that Medicare crossover claims for        
physician-administered drugs do not typically include NDCs 
When submitting crossover claims, Medicare providers are required to 
enter NDCs and the corresponding quantities on claims for physician-
administered drugs.  The Medicare contractor then transfers the claim 
to Medicaid to determine any additional coverage.  However, 18 States 
reported that Medicare contractors do not typically provide them with 
the NDC information when transferring the claims to the State 
Medicaid agencies (either because Medicare providers do not include 
the NDC information on the claims or because the Medicare 
contractors do not transfer this information to Medicaid).  Without an 
NDC, a State would generally not be able to identify the appropriate 
manufacturer to bill for rebates and would not be able to collect 
rebates for these claims.  
In addition, four States reported difficulties with manufacturer       
nonpayment of rebates for crossover claims (three reported an increase 
in disputes from manufacturers; one stated that manufacturers were 
unwilling to pay rebates for these types of claims).58  An additional two 
States believed that CMS did not require Medicare providers to 
include NDCs on crossover claims,59 and one State was unsure if CMS 
allowed the collection of rebates on crossover claims for physician-
administered drugs.  
 
 
57 Numbers relating to crosswalk files may be higher because States were never 
explicitly asked on our survey about issues with CMSs crosswalk file.  States were 
included in this count if they opted to mention crosswalk issues. 
58 Three of these four States reported that an NDC was typically listed on a crossover 
claim. 
59 Both States reported that an NDC was typically listed on a crossover claim. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  20   
   
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Twelve States reported that certain manufacturers refused to pay rebates 
or consistently disputed requested payments  
Twelve States described issues with manufacturers other than 
inaccurate unit conversions of NDCs and inaccurate reporting of NDC 
information.  Among these, States reported disputes that did not 
appear to have a legitimate reason.  States descriptions included 
manufacturers that refused to pay rebates and manufacturers that 
requested the same information each quarter to substantiate the 
amount requested.  One State reported that simply those 
manufacturers that like to dispute are determining how far they can 
push things in this area.  This State reported that one manufacturers 
refusal to pay rebates had resulted in a loss of more than $400,000.  
Another State reported that a few manufacturers have just not 
responded to any invoices and letters.  CMS facilitates the Medicaid 
Drug Rebate Dispute Resolution Program, which is specifically 
designed for resolving these types of issues.60 
 
Physician-administered drug 
Thirty-one States had not implemented certain 
claims submitted by a 340B 
steps necessary for collecting rebates on all 
entity generally do not 
eligible physician-administered drugs  qualify for rebates because 
purchased by 340B entities  the drugs are already 
purchased at a discounted 
rate.  All but three of the States reported that they have an edit or 
another mechanism to prevent manufacturers from paying duplicate 
discounts (this occurs when a manufacturer charges a discounted rate 
for a 340B drug and also pays a rebate for that discounted drug).61  
For example, States identify claims submitted by 340B entities and 
exclude these from rebate invoicing.  
However, States may collect rebates for physician-administered drugs 
in cases in which the physician-administered drugs were carved out   
(i.e., the 340B entity maintains a separate inventory of non-340B 
drugs for the purposes of dispensing to Medicaid patients and billing 
to States at the regular Medicaid rates).  In total, 31 States did not 
 
60 We did not ask States to describe their knowledge and use of the Medicaid Drug 
Rebate Dispute Resolution Program. 
61 Section 340B of the Public Health Service Act requires States to establish a 
mechanism to prevent duplicate discounts.  42 U.S.C.  256b(a)(5).   
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have an edit to identify carved-out claims for physician-administered 
drugs submitted by 340B entities and/or did not require the 340B 
entities to put NDCs on carved-out claims.  Without edits to identify 
the claim itself or an NDC to enable States to determine the correct 
manufacturer to invoice, it would have been very difficult, if not 
impossible, to collect the rebates. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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An April 2004 OIG report found that many States were not collecting 
rebates for physician-administered drugs and could have saved 
millions of dollars had they collected these rebates.  Subsequently, the 
DRA mandated that States collect rebates for all single-source, 
physician-administered drugs and the 20 multiple-source,       
physician-administered drugs with the highest dollar volume.  The 
DRA also mandated that States require providers to include NDCs on 
claims for these drugs.  According to States responses, as of           
June 2009, the majority met the DRAs requirements.  However, many 
States reported difficulties that would have prevented or delayed them 
from collecting all rebates owed for these drugs.   
In addition, 22 States could not provide complete rebate data for 
physician-administered drugs.  The available data provided by these 
States and the complete data from the remaining 26 responding States 
had such variability that we had concerns about the datas accuracy 
and reliability.  In other words, not all States appear to be adequately 
tracking rebates, which are an additional source of funds for the 
States.  Furthermore, factors such as manufacturer disputes, incorrect 
NDC reporting by providers, the absence of NDCs on 340B claims and 
crossover claims, and States inability to identify 340B claims most 
likely contributed to States not collecting all rebates requested and/or 
not requesting all rebates owed. 
Impending changes mandated in the Patient Protection and Affordable 
Care Act include expanding the Medicaid eligibility guidelines, which 
will most likely result in an increase in the number of covered 
beneficiaries.  It is therefore imperative that States collect the 
required physician-administered drug rebates in the most efficient 
manner as soon as possible.  Many States are currently experiencing 
financial difficulties; eliminating delays and inefficiencies with rebate 
collections would provide States with an additional source of funds in a 
timelier manner. 
Although CMS has undertaken numerous steps to ensure that States 
comply with the DRAs requirements for physician-administered 
drugs, the findings of this report show that substantial issues remain 
and need to be addressed.  Therefore, we recommend that CMS:  
 
 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  23   
   
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Take action against States that do not meet the DRAs requirement 
to collect rebates on physician-administered drugs 
As of June 2009, 13 States were not collecting rebates on                    
all single-source, physician-administered drugs and the                      
20 multiple-source, physician-administered drugs with the highest 
dollar volume and therefore were not fully meeting the DRAs 
requirements.  As a result, the FFP should not be available on any 
eligible physician-administered drug claims for which States are not     
seeking rebates.  CMS should instruct these States to begin collecting 
the required rebates as soon as possible and consider withholding     
the FFP if States do not comply.   
CMS should also emphasize to all State Medicaid agencies the 
additional savings that could result from collecting rebates for 
physician-administered drugs billed on applicable crossover claims 
and carved-out 340B claims.  States were not always obtaining the 
NDC information on crossover or eligible 340B claims.  CMS should 
ensure that the Medicare providers billing crossover claims, the 
Medicare contractors processing crossover claims, and the 340B 
entities submitting carved-out claims include the NDC for rebate 
purposes. 
Ensure that all State agencies are accurately identifying and 
collecting physician-administered drug rebates owed by 
manufacturers   
Many States could not determine the amount of rebates collected and 
some States could not determine the amount of rebates requested for 
physician-administered drugs.  Those States that could provide this 
information had such variation in their data that it calls into question 
the accuracy of the data provided.  Without accurate and complete 
records, States cannot identify all of the rebates owed by 
manufacturers for physician-administered drugs.   
Furthermore, many States reported inaccurate NDC information on 
the claims providers submit and an increase in disputes from 
manufacturers regarding such claims.  Any disputes would most likely 
delay rebates or even reduce the amount of rebates collected, thereby 
decreasing the States collection rate.  To alleviate these difficulties, 
CMS could encourage States to take advantage of the agencys 
Medicaid Drug Rebate Dispute Resolution Program.  
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  24   
   
R E C O M M E N D A T I O N S  
Work with States to develop guidance for implementing edits that 
increase the efficiency of physician-administered drug claim 
reviews 
Implementing additional edits may help to increase the accuracy of 
physician-administered drug claims and the efficiency of the claims 
review, thereby reducing the time and effort States need to verify or 
obtain accurate NDC information from providers.  CMS had followed 
up with States in 2008 about implementing edits for denying claims 
without NDCs; however, based on our findings, not all States have 
followed through with this implementation.  CMS should continue to 
work with States to develop guidance about edits that facilitate 
efficient rebate collection and should encourage their implementation 
among all States.  These edits could include denying claims without an 
NDC (including crossover claims); verifying the accuracy of the NDC, 
the NDCs units, and corresponding HCPCS code; and verifying that 
the units for the NDC and HCPCS are converted correctly.   
Edits, such as denials for claims without an NDC, may help facilitate 
rebate collection by creating an incentive for providers to report 
accurate NDC information.  In addition, by having an edit(s) that 
verifies the NDC aspect of the claim, manufacturer disputes about the 
accuracy of claim information may be lessened.  Also, States may 
further reduce expenditures on physician-administered drugs by 
having an edit to identify and enable rebate collection for the     
carved-out physician-administered drug claims. 
Work with the States to administer guidance to providers and 
Medicare contractors about the rebate requirements for   
physician-administered drugs  
Although CMS has issued guidance to State Medicaid Directors and 
providers in the past, our findings demonstrate that many States are 
not meeting the DRAs rebate requirements.  CMS should reiterate the 
importance of collecting rebates for physician-administered drugs to 
States and should work with States to convey this information to 
providers and Medicare contractors that submit claims for             
dual-eligible beneficiaries.  To that end, CMS should assist States in 
developing guidance that clarifies the NDC requirement for the States 
to pass on to all providers and Medicare contractors.  Having States 
offer guidance to providers and Medicare contractors about the DRA 
requirements may eliminate any confusion or alleviate the resistance 
providers may have to reporting NDCs.  In addition, CMS should 
ensure that States reemphasize to those Medicare contractors that 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  25   
   
R E C O M M E N D A T I O N S  
 
process claims for dual-eligible beneficiaries the importance of 
providing the NDC information when the claims are crossed over to 
Medicaid.  
Ensure that the crosswalk file is complete, accurate, and 
identifies rebateable physician-administered drugs 
Although CMS currently publishes a quarterly crosswalk file, seven 
States mentioned issues with the data in this file.  Certain States 
expressed concern with the accuracy and completeness of the data in 
this file, as well as the files usefulness for identifying and 
crosswalking rebateable physician-administered drugs.  These States 
mentioned that an official crosswalk that contains accurate and       
up-to-date information for physician-administered drugs would make 
rebate collections more efficient and timely.  States that described 
issues with the crosswalk file used the file either to identify the NDC 
or to validate the NDC information on the claim. 
The agency could also add an identifier to the crosswalk that would 
enable States to easily identify rebateable physician-administered 
drugs.  This crosswalk would include all rebateable NDCs linked to 
the corresponding HCPCS code, the units of service for each NDC and 
HCPCS code, and a conversion factor for all available drug codes.  All 
States would have access to this crosswalk.  It would be maintained 
and updated frequently so that States could easily identify terminated 
physician-administered drugs and physician-administered drugs 
provided by manufacturers without a rebate agreement.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR 
GENERAL RESPONSE 
CMS concurred with our first three recommendations, but did not 
concur with the remaining two.  CMS also noted that it has taken 
many steps to ensure that States are meeting the rebate requirements 
for physician-administered drugs. 
In concurring, CMS stated that before taking any action against 
States, the agency needs to learn more about the systemic problems 
that prevent States from collecting rebates for physician-administered 
drugs and that it will continue to work with States to identify and 
reduce these barriers.  CMS also stated that it will reiterate the rebate 
requirements in a release to States, as well as provide technical 
assistance.  CMS stated that if States do not meet the requirements, it 
may consider withholding FFP in the future, although the agency 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  26   
   
R E C O M M E N D A T I O N S  
 
 
anticipates the additional assistance to the States, as described above, 
will make such actions unnecessary.   
CMS did not concur with our fourth recommendation, that it 
administer guidance to providers and Medicare contractors about the      
physician-administered drug rebate requirements.  The agency 
generally considers direct provider communication to be within the 
States purview and has therefore left this responsibility to them.  
CMS also maintains that Medicare contractors are aware of the     
physician-administered drug requirements through Med Learn 
Matters and have established procedures to accept NDCs on crossover 
claims. 
We have modified our original recommendation slightly to address 
CMSs statement that provider communication is a responsibility of 
the State.  However, because States reported that providers and 
Medicare contractors often did not provide or provided incorrect NDC 
information on physician-administered drug claims, we continue to 
believe that additional communication with and education for 
providers and Medicare contractors are warranted.   
Finally, CMS did not concur with our fifth recommendation, that it 
ensure that the crosswalk file is complete and accurate.  According to 
CMS, a State that is in full compliance with the DRAs NDC 
requirements should not need to rely on the crosswalk to properly 
collect rebates.  Although CMSs assertion is accurate, not all States 
fully met the DRAs NDC requirements and therefore needed to use 
the crosswalk.  Additionally, some DRA-compliant States reported 
using the crosswalk to perform tasks such as manual claim validations 
and unit-of-measure conversions.  Therefore, we continue to believe 
that CMS should ensure that States have access to a reliable 
crosswalk file.   
For the full text of CMSs comments, see Appendix D. 
 
 
 
 
 
 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  27   
   
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             Detailed Description of the Medicaid Drug Rebate Calculation 
Manufacturer requirements.  Currently, manufacturers must submit 
average manufacturer price (AMP) data to the Centers for Medicare & 
Medicaid Services (CMS) for each of their covered outpatient drugs on 
monthly and quarterly bases, although only the quarterly data are 
used for rebate purposes.62  The AMP is defined as the average price 
paid to the manufacturer for the drug in the United States by 
wholesalers for drugs distributed to retail community pharmacies and 
by retail community pharmacies that purchase drugs directly from the 
manufacturer, with certain exclusions.63 
Manufacturers must also provide CMS with the drug category for each 
of their covered outpatient drugs in conjunction with AMP data.64  In 
the Medicaid drug rebate program, drugs are generally categorized as 
one of three types:  single-source, innovator multiple-source, or 
noninnovator multiple-source.  In general terms, a single-source drug 
would typically be a brand-name product with no available generic 
versions.  An innovator multiple-source drug would typically be a   
brand-name product that has available generic versions.  A 
noninnovator multiple-source drug would simply be a generic version 
of any multiple-source product.   
Manufacturers of single-source and innovator multiple-source drugs 
are also required to provide CMS with the best price available for each 
covered outpatient drug.65  Best price is defined as the lowest price 
available from the manufacturer during the rebate period to any 
wholesaler, retailer, provider, health maintenance organization, 
nonprofit entity, or governmental entity within the United States, 
with certain exceptions.66  Manufacturers of noninnovator        
multiple-source drugs are not required to provide their best price.   
Basic rebate.  CMS uses the manufacturer-reported AMP data and 
drug type information to calculate a unit rebate amount (URA) for 
 
62 Section 1927(b)(3) of the Social Security Act (the Act). 
63 Section 1927(k)(1) of the Act, as amended by section 2503(a)(2) of the Patient 
Protection and Affordable Care Act (ACA), P.L. 111-148. 
64 Section II of the rebate agreement between the manufacturer and the Secretary of 
Health & Human Services. 
65 Section 1927(b)(3)(A)(i)(II) of the Act. 
66 Section 1927(c)(1)(C)(i) of the Act. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  28   
   
A P P E N D I X   ~   A  
 
each covered outpatient drug.  The formula used to determine the 
URA depends on the drug category reported by the manufacturer.67  
From 1996 to 2009, the basic URA for single-source and innovator 
multiple-source drugs was the greater of 15.1 percent of the AMP or 
the difference between the AMP and best price, and the basic URA for 
noninnovator multiple-source drugs was 11 percent of the AMP.68, 69 
Additional rebate for innovator drugs.  Manufacturers of single-source 
and innovator multiple-source drugs are required to pay an additional 
rebate if the drugs AMP increases faster than inflation.70, 71, 72  To 
determine whether manufacturers owe an additional rebate for a drug, 
its base date AMP is updated for the present quarter using the 
Consumer Price Index published by the Bureau of Labor Statistics.73  
If the resulting figure is greater than or equal to the reported AMP in 
the quarter, no additional rebate is owed (i.e., the AMP did not 
increase at a greater rate than inflation).  If the resulting figure is less 
than the reported AMP in the quarter, then the additional URA is 
equal to the difference between the reported AMP and the inflation-
adjusted base date AMP. 
 
 
 
 
 
 
 
67 Section 1927(c) of the Act. 
68 Sections 1927(c)(1)(A) and (c)(3)(A) of the Act. 
69 Pursuant to section 2501(a) of the ACA, as of January 1, 2010, the basic URA for    
single-source and innovator multiple-source drugs was increased to the greater of        
23.1 percent of the AMP or the difference between the AMP and best price (with certain 
exceptions).  Pursuant to section 2501(b) of the ACA, the basic URA for noninnovator 
multiple-source drugs was increased to 13 percent of the AMP. 
70 Section 1927(c)(2) of the Act. 
71 Manufacturers of noninnovator multiple-source drugs are not required to pay an 
additional rebate. 
72 CMS, Unit Rebate Amount Calculation.  Accessed at http://www.cms.hhs.gov on               
August 20, 2009. 
73 Base date AMP is the AMP in the first full quarter that a drug is on the open 
market. 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  29   
   
 A P P E N D I X   ~   B  
  State Responses About the Deficit Reduction Act of 2005 Requirements for    
  Physician-Administered Drugs 
 
  Table B-1:  Detailed Description of Responses From States That Reported Meeting the   
  Deficit Reduction Act of 20051 Rebate Requirements for Physician-Administered   
  Drugs as of June 2009 
     
Did the State Require National 
State  Physician-Administered Drugs for  Drug Codes on              States Action When a National Drug 
Which States Collected Rebates in the  Physician-Administered Drug  Code Was Not Included on a Claim as of 
First Half of 2009  Claims as of June 2009?  June 2009 
Crosswalks the Healthcare Common 
Procedure Coding System (HCPCS) codes 
to national drug codes (NDC) for          
single-source drugs; denies for  
AK  All physician-administered drugs  Yes  multiple-source drugs 
All single-source and the 20 highest dollar  Crosswalks HCPCS to NDC for 
 
volume multiple-source,                single-source drugs; denies for 
AL2   physician-administered drugs   Yes   multiple-source drugs 
 
AR  All physician-administered drugs  Yes  Denies the claim 
 
CA3  All physician-administered drugs  Yes  Denies the claim 
All single-source and the 20 highest dollar  Crosswalks HCPCS to NDC for  
volume multiple-source,                single-source drugs; denies for the required 
CO  physician-administered drugs  Yes  top 20 multiple-source drugs  
CT  All physician-administered drugs  Yes  Denies the claim 
DE  All physician-administered drugs  Yes  Denies the claim 
GA  All physician-administered drugs  Yes  Denies the claim 
HI  All physician-administered drugs  Yes  Not applicable (providers bill only with NDC) 
All single-source and the 20 highest dollar 
volume multiple-source,               
IA  physician-administered drugs  Yes  Denies the line item of claim 
ID  All physician-administered drugs  Yes  Denies the claim 
IL4  All physician-administered drugs  Yes  Denies the claim 
IN  All physician-administered drugs  Yes  Denies the claim 
KS  All physician-administered drugs  Yes  Denies claim detail 
All single-source and the 20 highest dollar 
volume multiple-source,               
KY  physician-administered drugs  Yes  Denies the claim 
                                                                                                  continued on next page                                                                               
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  30   
   
A P P E N D I X   ~   B  
Table B-1:  Detailed Description of Responses From States That Reported Meeting the 
DRAs Rebate Requirements for Physician-Administered Drugs as of June 2009 
(Continued) 
     
Did the State Require National 
State  Physician-Administered Drugs for  Drug Codes on           States Action When a National Drug 
Which States Collected Rebates in the  Physician-Administered Drug  Code Was Not Included on a Claim as of 
First Half of 2009  Claims as of June 2009?  June 2009 
MA  All physician-administered drugs  Yes  Denies the claim 
MD  All physician-administered drugs  Yes  Denies the claim 
MN  All physician-administered drugs  Yes  Denies the claim 
MS  All physician-administered drugs  Yes  Not applicable (providers bill only with NDC) 
MT  All physician-administered drugs  Yes  Denies the claim 
All single-source and the 20 highest dollar 
volume multiple-source,               
NC  physician-administered drugs  Yes  Denies the claim detail 
ND  All physician-administered drugs  Yes  Denies the claim 
NH  All physician-administered drugs  Yes  Denies the claim 
NV  All physician-administered drugs  Yes  Denies the claim 
OK  All physician-administered drugs  Yes  Denies the claim 
PA  All physician-administered drugs  Yes  Not applicable (providers bill only with NDC) 
RI4  All physician-administered drugs  Yes  Denies the claim 
SC  All physician-administered drugs  Yes  Denies the claim 
SD  All physician-administered drugs  Yes  Denies the claim 
UT  All physician-administered drugs  Yes  Denies the claim 
VA  All physician-administered drugs  Yes  Denies the claim 
VT  All physician-administered drugs  Yes  Denies the claim detail 
WA  All physician-administered drugs  Yes  Denies the claim 
WI  All physician-administered drugs  Yes  Denies the claim 
WV  All physician-administered drugs  Yes  Denies the claim 
WY  All physician-administered drugs  Yes  Denies the claim 
Source:  Office of Inspector General (OIG) analysis of State survey responses, 2010. 
1 DRA. 
2 Collected rebates for 29 multiple-source, physician-administered drugs that either are currently or have previously been on the top 20 list.   
3 Collected only single-source rebates in the first quarter of 2009, but collected rebates for all physician-administered drugs in the second quarter of 2009. 
4 These States collected rebates prior to 2009, but at the time of our data request, they had not yet invoiced for first- and second-quarter 2009 rebates.  
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  31   
   
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Table B-2:  Detailed Description of Responses From States That Reported Not Meeting     
the DRAs Rebate Requirements for Physician-Administered Drugs as of June 2009 
     
Did the State Require National 
State  Physician-Administered Drugs for  Drug Codes on          States Action When a National Drug 
Which States Collected Rebates in the  Physician-Administered Drug  Code Was Not Included on a Claim as of 
First Half of 2009  Claims as of June 2009?  June 2009 
DC  No rebate collection  No NDC required  No rebate collection 
Crosswalks the HCPCS to the NDC for 
single-source drugs; for multiple-source 
All physician-administered drugs with an  drugs, denies professional claims; pays 
NDC and single-source drugs that can be  No NDC required for institutional  institutional and 340B claims regardless      
FL  crosswalked to an NDC   claims  of NDCs   
No NDC required for institutional 
LA1  For professional claims only  claims  Denies professional claims only 
All physician-administered drugs for 
professional claims; only the top             
20 multiple-source,                      
physician-administered drugs for  No NDC required for institutional  Except for single-source institutional     
ME2  institutional claims  claims for single-source drugs  claims, denies the claims 
Denies all single-source drug claims; denies 
professional claims for multiple-source drugs 
All single-source drug claims and   (but pays institutional claims for         
MI3  multiple-source outpatient claims  Yes  multiple-source drugs) 
Crosswalks the HCPCS to the NDC for  
single-source drugs; in certain cases, pays 
All outpatient physician-administered  providers on a HCPCS with no NDC for 
MO  drugs and the top 20 inpatient drugs  Yes  multiple-source drugs  
Crosswalks the HCPCS to the NDC for  
single-source drugs; for multiple-source 
drugs, attempts to contact provider for the 
All physician-administered drugs if an  NDC; otherwise, pays the claim and collects 
NE  NDC is submitted  Yes  no rebate 
All physician-administered drugs if an  No NDC required for institutional 
NJ4  NDC is submitted  claims  Denies professional claims only 
Crosswalks the HCPCS to the NDC for  
single-source drugs; for multiple-source 
drugs, attempts to contact provider for the 
All physician-administered drugs if an  NDC; otherwise, pays the claim and collects 
NM5  NDC is submitted  No NDC required  no rebate 
 
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A P P E N D I X   ~   B  
Table B-2:  Detailed Description of Responses From States That Reported Not Meeting  
the DRAs Rebate Requirements for Physician-Administered Drugs as of June 2009 
(Continued) 
   
Did the State Require National 
State  Physician-Administered Drugs for  Drug Codes on          States Action When a National Drug 
Which States Collected Rebates in the  Physician-Administered Drug  Code Was Not Included on a Claim as of 
First Half of 2009  Claims as of June 2009?  June 2009 
All single-source and the 20 highest dollar  Crosswalks the HCPCS to the NDC for  
volume multiple-source drugs if an NDC is  single-source drugs; for multiple-source 
NY6  submitted  No NDC required  drugs, pays the claim and collects no rebate  
  Crosswalks the HCPCS to the NDC for 
single-source drugs (no edit that denies 
OR7  All single-source drugs only  Yes  physician-administered drug claims) 
Physician-administered drugs if an NDC is     Pays the claim, but does not invoice for a 
TN  submitted  Yes  rebate 
    Crosswalks to the NDC for single-source 
drugs; denies claims for multiple-source 
TX  Outpatient claims only  Yes  drugs 
Source:  OIG analysis of State survey responses, 2010. 
1 For institutional claims, Louisiana reported that it required NDCs and began to deny institutional claims without NDCs on July 6, 2009; the State reported 
invoicing manufacturers for rebates on institutional claims in the third quarter of 2009. 
2 Maine reported that it had plans to deny institutional claims in April 2010. 
3 Michigan reported that it anticipates having an edit to deny institutional claims in the first quarter of 2010. 
4 New Jersey reported that it required NDCs for institutional claims and began denying those without NDCs on November 1, 2009. 
5 New Mexico reported that it had plans to begin denying claims in September 2010. 
6 New York reported that it required NDCs and began denying claims without NDCs in September 2009. 
7 Oregon reported that it had plans to deny claims beginning in the first quarter of 2011. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 A P P E N D I X   ~   C  
       Physician-Administered Drug Data Reported by States for the First Half of 2009 
Table C-1:  Data Reported by States With Complete First- and Second-Quarter      
2009 Rebate Collection Information for Physician-Administered Drugs  
State  Amount Reimbursed  Rebates Requested  Rebates Collected 
AR  $4,048,745  $1,289,196  $500,913 
CA1  $161,713,669  $9,493,609  $6,126,611 
CO  $43,629,213  $2,321,421  $1,367,797 
GA  $32,903,117  $14,277,592  $12,899,334 
IA  $7,066,332  $1,329,335  $1,194,332 
IN  $49,896,247  $16,025,453  $5,173,816 
KS  $12,671,634  $3,573,547  $3,185,071 
LA  $31,769,620  $3,355,007  $2,791,403 
MA  $673,636  $1,894,216  $649,389 
MD  $502,569  $216,153  $75,401 
ME2  $2,734,419  $1,293,708  $1,129,499 
MN  $11,762,804  $4,318,050  $3,470,199 
MS  $8,904,654  $5,731,922  $2,857,323 
MT  $4,204,705  $1,047,235  $897,013 
NC  $43,420,571  $14,763,273  $13,134,910 
ND  $1,948,523  $1,245,305  $548,465 
NM  $1,621,813  $261,676  $245,420 
NY  $17,228,950  $7,193,340  $6,425,807 
OH  $12,761,519  $1,671,643  $1,644,731 
OR  $4,031,303  $4,538,946  $240,682 
TN  $32,793,117  $20,500,859  $19,278,252 
UT  $7,869,410  $1,434,168  $1,212,263 
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  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  34   
   
A P P E N D I X   ~   C  
Table C-1:  Data Reported by States With Complete First- and Second-Quarter 
2009 Rebate Collection Information for Physician-Administered Drugs 
(Continued) 
State  Amount Reimbursed  Rebates Requested  Rebates Collected 
WA3  $14,550,089  $1,192,532  $706,330 
WI  $59,564,540  $25,411,782  $24,820,264 
WV  $8,070,634  $3,832,915  $1,275,701 
WY  $832,546  $235,942  $215,897 
     Total4  $577,174,377  $148,448,829  $112,066,822 
           Source:  Office of Inspector General (OIG) analysis of State rebate data, 2010. 
 1 In the first quarter of 2009, California was collecting rebates only for single-source, physician-administered drugs. 
 2 At the time of our data collection, Maine was still invoicing for rebates applicable to second-quarter 2009 institutional claims. 
 3 At the time of our data request, Washington had not invoiced manufacturers for second-quarter 2009 rebates. 
 4 Figures do not add to totals because of rounding. 
 Note:  For certain States, the rebates requested exceed the amounts reimbursed.  These States reported that this may occur, for    
 example, when the rebate rate is greater than what they pay in reimbursement or because the reimbursement amount does not   
 include third-party liabilities, copays, etc.  The State can invoice for the full rebate amount, which may include these figures.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  35   
   
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Table C-2:  Data Reported by States Without Complete First- and Second-Quarter 2009  
 Rebate Collection Information for Physician-Administered 
Rebates  Rebates 
State  Amount Reimbursed  Requested  Collected  Reason for Missing Data 
 
Could not differentiate between physician-administered and 
DK1  all other Medicaid claims, but provided an estimated rebate 
AK  $23,430,017  $1,407,365  collection rate of nearly 100 percent 
 
Could not differentiate between physician-administered and 
AL  $8,973,445  $2,651,094  DK  all other Medicaid claims 
 
Could not differentiate between physician-administered and 
DK  all other Medicaid claims, but provided an estimated rebate 
CT  DK  $6,551,347  collection rate of 67 percent 
 
Could not differentiate between physician-administered and 
DE  $1,683,131  $216,430  DK  all other Medicaid claims 
 
FL  $46,127,270  $19,563,323  DK  Documented some of the rebates collected   
 
ID  $3,837,264  DK  DK  Did not document any rebates requested or collected 
 
Could not differentiate between physician-administered and 
DK  all other Medicaid claims, but provided an estimated rebate  
KY  $14,780,463  $1,272,449  collection rate of nearly 100 percent 
 
Could not differentiate between physician-administered and 
DK  all other Medicaid claims, but provided an estimated rebate 
MI  $30,647,239  $8,720,352  collection rate of nearly 98 percent 
   
Could not differentiate between physician-administered and 
MO  $16,881,431  DK  DK  all other Medicaid claims 
   
Reported unit conversion inaccuracies in the rebate data, 
NE2  $3,641,198  DK  DK  but working with manufacturers to make adjustments  
Could not differentiate between physician-administered and 
all other Medicaid claims, but provided an estimated rebate  
NH  $14,960,227  $1,205,831  DK  collection rate of nearly 100 percent 
For rebates requested, reported inaccuracies with the data; 
for rebates collected, could not differentiate between 
NJ  $3,514,685  DK  DK  physician-administered and all other Medicaid claims   
                                                                                                                           continued on next page                                                                               
 
 
 
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Table C-2:  Data Reported by States Without Complete First- and Second-Quarter 2009  
  Rebate Collection Information for Physician-Administered Drugs (Continued) 
Rebates  Rebates 
State  Amount Reimbursed  Requested  Collected  Reason for Missing Data 
Could not differentiate between physician-administered and 
all other Medicaid claims for reimbursement and rebates 
NV  DK  DK  DK  requested; rebates collected amount was an estimate 
 
Could not differentiate between physician-administered and 
OK  DK  DK  DK  all other Medicaid claims 
Could not differentiate between physician-administered and 
SC  $114,155,241  $6,901,292  DK  all other Medicaid claims 
SD  $1,388,505  $1,052,284  DK  Could not readily determine rebates collected 
TX  $56,645,451  DK  DK  Reported unit conversion inaccuracies in the rebate data 
Could not differentiate between physician-administered and 
all other Medicaid claims, but provided an estimated rebate 
VA  $12,280,254  $6,954,167  DK  collection rate of nearly 100 percent 
Could not differentiate between physician-administered and 
VT  $1,651,481  $487,043  DK  all other Medicaid claims 
    Could not   
   Total  $354,597,303  $56,982,977  determine 
   Source:  OIG analysis of State rebate data, 2010. 
  1 DK = State could not determine the data requested.  
   2 The amount reimbursed is only for the first quarter of 2009.  In addition, Nebraska had yet to receive any rebate payments for the first quarter of 2009 and 
had not invoiced for second-quarter 2009 rebates at the time of our request. 
 
 
 
 
 
   
 
 
 
 
 
 
 
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  Table C-3:  Data Reported by States That Did Not Invoice for Physician-Administered     
  Drug Rebates During the First and Second Quarters of 2009 
Rebates  Rebates 
State  Amount Reimbursed  Requested  Collected  Reason for Missing Data 
DC  $999,379  $0  $0  Did not collect rebates 
At the time of this study, this State had not yet billed       
IL  $47,461,395  $0  $0  first- and second-quarter 2009 rebates 
At the time of this study, this State had not yet billed       
RI  $3,497,104  $01  $0  first- and second-quarter 2009 rebates 
   Total  $51,957,878  $0  $0   
  Source:  OIG analysis of State rebate data, 2010. 
  1 This State estimated that $550,000 in rebates for physician-administered drugs will be invoiced for the first and second quarters of 2009. 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  38   
   
  A P P E N D I X   ~   D
   
Agency Comments 
Centers 10'Medica,e &Medicaid Services
Administrator
Washington, DC 20201
DATE: MAR 2 3 2011
TO: DanielR.Levinson
Inspector General
FROM: Donald M.Berwick, M,D:
Administrator
SUBJECT: Office ofInspector General (OIG) Draft Report: "States' Collection ofMedicaid
RebatesforPhysician-Administered Drugs" (OEI-03-09-0041 0)
Thank youfortheopportunity toreview andcomment onthesubject OIG draft report. The
purpose ofthisreport wastodetermine thecompliance ofStates with theMedicaid drug rebate
requirements forphysician-administered drugs.
The Deficit Reduction Actof2005 (ORA) specifically requires thatStates collect rebates on
claims forcertain physician-administered drugs forFederal matching funds tobeavailable. The
ORAalsomandated thatclaims forphysician-administered drugs include national drug codes
(NOCs), thereby allowing Statestoinvoice manufacturers thatareresponsible forpaying rebates.
Sincethepassage oftheORA, theCenters forMedicare &Medicaid Services (CMS) hastaken
manystepstoensure thatStatesaremeeting thenewrebate requirements forphysician-
administered drugs.
OJG Findings
TheOIGfound thatasofJune 2009, 42of49responding States reported meeting theORA's
requirement tocollect NDCs onclaims forphysician-administered drugs. The findings noted
thatStates mayhave collected OCs forphysician-administered drugs and still nothave metthe
ORA's rebate collection requirements. ByJune2009,73 percent ofresponding States reported
meeting orexceeding theORA's requirement tocollect rebates forcertain physician-
administered drugs. Specifically, 36of49responding States reported collecting rebates on all
single-source physician-administered drugs andthe20multiple source physician-administered
drugs withthehighest dolJarvolume, asrequired bytheORA. Anadditional 12States reported
collecting rebates onasubset ofphysician-administered drugs, butwerenot infullcompliance
with theORA's rebate requirements. Only IStatereported that itdidnotcollect rebates onany
physician-administered drugs.
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A P AP EC NK DN IOX W  ~L  E DD  G M E N T S  
This report was prepared under the direction of Robert A. Vito, 
Regional Inspector General for Evaluation and Inspections in the 
Philadelphia regional office, and David E. Tawes, Director of the 
Medicare and Medicaid Prescription Drug Unit.   
Stephanie Yeager served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to the report include 
Kevin McAloon.  Central office staff who contributed include Kevin 
Manley and Arianne Spaccarelli. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-09-00410  STATES COLLECTION OF MEDICAID REBATES FOR PHYSICIAN-ADMINISTERED DRUGS  43   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
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