Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
 
FDA A S
S    PPROVAL  TATUS OF 
 
D P M  
RUGS  AID FOR BY  EDICAID
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
November 2010 
OEI-03-08-00500   
   
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 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To determine the Food and Drug Administrations (FDA) approval 
status of drugs paid for by Medicaid in 2008.     
BACKGROUND 
Before a new drug may be legally marketed in the United States, it 
must be approved by FDA for safety and effectiveness.  According to 
FDA, drugs lacking this approval may pose a significant public health 
concern because they may not meet FDA standards for safety, 
effectiveness, quality, and labeling.   
FDAs system for collecting and maintaining drug product and approval 
information is known as the Drug Registration and Listing System 
(DRLS).  As part of the DRLS, FDA maintains a publicly accessible 
database of currently listed drugs called the National Drug Code (NDC) 
Directory.  The NDC Directory contains the name; the NDC (i.e., a 
numeric drug identifier); and the approved application number for each 
listed drug.  The DRLS also includes nonpublic files of pending and 
discontinued NDCs.  FDA acknowledges that the databases in DRLS 
may be inaccurate and incomplete. 
FDA has additional databases containing approval information.  One of 
these databases contains biological products, such as vaccines and blood 
(among others), used in the prevention, treatment, or cure of a disease 
or condition.  Another is Drugs@FDA, which is a publicly available FDA 
database that provides each drugs approval history, including approved 
labels (i.e., the official description of a drug product that includes 
indications for which the drug is approved, states who should take it, 
and provides safety information), and indicates whether it was approved 
under a new drug application or an abbreviated new drug application; it 
does not list any of this information by the NDC.   
To qualify for Federal payment under Medicaid, drugs generally must 
be approved by FDA, with certain exceptions.  Medicaid payments for 
prescription drugs totaled approximately $24 billion in 2008.  In 2008, 
the Office of Inspector General (OIG) received a congressional request to 
examine the FDA approval status of drugs paid for by Medicaid.   
We used 2008 Medicaid utilization data for prescription drugs, approval 
and listing data from FDA, and a targeted manual review to accomplish 
our objective.   
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E X E C U T I V E   S U M M A R Y  
FINDING 
Sixty-two percent of drugs paid for by Medicaid in 2008 had an 
approved application number in the NDC Directory; the remaining 
38 percent either did not have an approved application number 
listed or were not in the NDC Directory at all.  In 2008, Medicaid paid 
for prescription drugs associated with 27,143 NDCs.  The NDC 
Directory listed approved application numbers for 16,945 (62 percent) of 
these NDCs.  Medicaid payment for these drugs totaled $17.8 billion in 
2008.  The remaining 38 percent of drugs paid for by Medicaid were 
either (1) listed in the NDC Directory but did not have an approved 
application number or (2) not listed in the NDC Directory at all.   
Twelve percent (3,158) of NDCs paid for by Medicaid in 2008 were listed 
in the NDC Directory but did not include an approved application 
number (i.e., the approved application number was other, was blank, 
or could not be determined).  More than three-quarters of these NDCs 
(2,426) had an approved application number listed as other in the 
NDC Directory and were not included in the other FDA databases.  
Medicaid payments for drugs associated with these 2,426 NDCs totaled           
$803 million in 2008.  Each of the remaining 732 NDCs had (1) an 
application number of other but was included in 1 of FDAs other 
databases, (2) an approval status that was blank, or (3) an approval 
status that could not be determined.     
A manual review of 25 of the 2,426 NDCs for which the approved 
application number was other (and that were not included in the other 
FDA databases) indicates that many of the associated drugs may 
actually be approved products.  Fourteen of these twenty-five NDCs 
appear to be approved products because they are actually included on 
the drugs approved labels; 3 additional NDCs appear to be associated 
with products approved by FDA; and the remaining 8 of these 25 NDCs 
do not have approval information in Drugs@FDA.    
Twenty-six percent (7,040) of the 27,143 NDCs associated with drugs paid 
for by Medicaid in 2008 were not listed in the NDC Directory.  More than 
half (3,893) of these NDCs were listed in the pending, discontinued, or 
biological files.  The remaining 3,147 NDCs were not listed in any of these 
files.  Therefore, FDA would be unable to determine the approval status 
based on the NDCs alone.  Medicaid payments for these 3,147 NDCs in 
2008 totaled $1.1 billion. 
A manual review of 25 of the 3,147 NDCs that were not listed in the NDC 
Directory or the pending, discontinued, or biological files indicates that 
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many of these drugs may actually be approved products.  Fourteen of the 
twenty-five unlisted NDCs that underwent manual review were included 
on approved labels (i.e., the FDA-approved labels for the drugs contained 
the NDCs under review); the remaining 11 unlisted NDCs did not appear 
on any approved labels.  Eight of these eleven NDCs were associated with 
drugs that appeared in Drugs@FDA; however, the specific NDC that 
underwent manual review was not on the approved label. 
RECOMMENDATION 
Generally, covered outpatient drugs must be approved by FDA to 
qualify for Federal payments under Medicaid.  Sixty-two percent of 
drugs paid for by Medicaid in 2008 had an approved application number 
in the NDC Directory.  However, data contained in the NDC Directory 
were inaccurate and incomplete, thereby preventing us from 
determining whether FDA approved the remaining 38 percent.  As a 
result, Medicaid could potentially pay for drugs that are not approved.  
This report highlights the fact that the NDC Directory cannot reliably 
be used to verify the approval and listing status of drugs paid for under 
Medicaid.   
Previous OIG reports also found problems with the accuracy and 
completeness of the NDC Directory and recommended changes to 
improve the database.  Given the previous recommendations and the 
potential impact on beneficiary health and the integrity of Medicaid 
payments, we continue to recommend that FDA: 
Improve the completeness and accuracy of the NDC Directory  
FDA could take the following steps:  
  Conduct frequent reviews of its NDC Directory to ensure its 
completeness and accuracy.  
  Work with the Centers for Medicare & Medicaid Services (CMS) 
and Congress to seek a legislative or regulatory change that 
compels manufacturers to list all approved products with FDA 
before the products become eligible for Medicaid payment.  By 
making payment under Medicaid contingent upon listing, 
manufacturers would have an increased incentive to ensure that 
FDA had the most complete and timely information on the 
products in the NDC Directory.   
 
 
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AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments on our draft report, FDA generally agreed with OIGs 
recommendation to improve the completeness and accuracy of the NDC 
Directory.  FDA stated that it recognizes that data quality has suffered 
in the past, agrees that the accuracy and completeness of data in the 
NDC Directory are imperfect, and remains committed to robust quality 
improvements.  FDA noted that it has already begun implementing 
several initiatives for evaluating and enhancing the quality of          
drug-listing data.   
FDA has agreed that it should work with CMS to examine changes that 
could further strengthen CMSs ability to ensure that drugs are listed 
with FDA prior to reimbursement.  FDA stated that it was pleased that 
OIG, by encouraging collaboration, recognized that both FDA and CMS 
have a role in identifying drug products potentially eligible for CMS 
payments.   
FDA stated that it is important to note some data limitations to ensure 
that OIGs findings are not misunderstood.  Specifically, FDA pointed 
out that OIGs manual review examined a small sample of NDCs, that 
most inaccuracies did not result in improper Medicaid payments, and 
that the NDC Directory is now more complete and accurate.   
OIG acknowledges that our manual review examined only a small 
number of high-dollar NDCs and that the results from this portion of 
the analysis cannot be projected to the entire universe of NDCs under 
review.  Although the analysis did not determine whether there were 
improper Medicaid payments, it did highlight the incomplete and 
inaccurate nature of the NDC Directory and the subsequent 
vulnerability for the Medicaid program.  Finally, our results reflect the 
state of the NDC Directory at the time of the review and show that in 
2008, the NDC Directory did not contain approval or listing information 
for nearly 40 percent of NDCs paid under Medicaid.  
In its comments on our draft report, CMS deferred to FDA regarding 
the response to OIGs recommendation and stated that it will continue 
to work with FDA on issues related to drug approval and Medicaid 
reimbursement.   
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 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
Sixty-two percent of drugs paid for by Medicaid in 2008 had an       
approved application number in the NDC Directory; the remaining            
38 percent either did not have an approved application number             
listed or were not in the NDC Directory at all . . . . . . . . . . . . . . . . . . . . 11 
 
R E C O MMEN D A T ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
  Agency Comments and Office of Inspector General Response . . . 15 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 
  A:  Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 
  B:  Food and Drug Administration Comments . . . . . . . . . . . . . . . 19 
  C:  Centers for Medicare & Medicaid Services Comments . . . . . . 25 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26   
   
I N T R O D U C T I O N  
 I N T R O D U C T I O N  
OBJECTIVE
 
To determine the Food and Drug Administrations (FDA) approval 
status of drugs paid for by Medicaid in 2008.   
BACKGROUND 
Before a new drug may be legally marketed in the United States, it 
must be approved by FDA for safety and effectiveness.  According to 
FDA, drugs lacking this approval may pose a significant public health 
concern because they may not meet FDA standards for safety, 
effectiveness, quality, and labeling.1  FDA tracks drug approvals using 
various databases, but acknowledges that certain of these databases 
may be inaccurate and incomplete.2  Previous Office of Inspector 
General (OIG) reports found problems with the accuracy and 
completeness of FDAs drug listing directory, identified factors that 
contributed to missing or obsolete drug listings, and recommended 
changes to improve the database.3   
To qualify for Federal payments under Medicaid, drugs generally must 
be approved by FDA, with certain exceptions.4  In a 2008 letter to OIG, 
a member of Congress expressed concern that Medicaid pays for drugs 
that do not meet this criterion and requested that OIG examine the 
FDA approval status of drugs paid for by Medicaid.   
FDA Approval and Listing Requirements  
FDA approval.  Section 505(a) of the Federal Food, Drug, and Cosmetic 
Act (FD&C Act) prohibits new drugs without FDA approval from being 
introduced into interstate commerce.5  As part of FDAs responsibility to 
protect public health, the agency evaluates new drugs based on 
 
1 FDA, FDAs Concerns About Unapproved Drugs.  Accessed at http://www.fda.gov on 
November 9, 2009.   
2 FDAs Response to Representative Edward J. Markey.  Accessed at 
http://www.ascp.com on February 18, 2010. 
3 OIG, The Food and Drug Administrations National Drug Code Directory,                     
OEI-06-05-00060, August 2006; and The FDA Prescription Drug File, OEI-03-90-02300, 
November 1991.   
4 An example of an exception would be a drug for which the Secretary of Health & 
Human Services (Secretary) had determined that there was a compelling justification for its 
medical need and for which a proposed order to withdraw approval had not been issued.  
5 Pursuant to section 201(b) of the FD&C Act, the circumstances that generally place a 
product in interstate commerce are commerce between any State or territory and any place 
outside thereof or commerce within the District of Columbia.   
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I N T R O D U C T I O N  
scientific evidence obtained from clinical studies and other research 
conducted by a drugs sponsor, typically a pharmaceutical company.  
The sponsor of an innovator (i.e., not generic) drug submits this 
information to FDA in a new drug application (NDA) (or supplemental 
NDA, if the sponsor is seeking approval for a new use for the drug), 
which the agency reviews to assess the drugs safety and effectiveness 
for the proposed use.  Similarly, the sponsor of a new generic drug 
submits an abbreviated new drug application (ANDA) to demonstrate 
that the drug is bioequivalent to an approved drug.  Based on the 
application review, FDA determines whether the drug can be approved 
to be marketed in the United States.  Upon approval, the sponsor 
receives a letter from FDA with the agencys approval as well as the 
approved NDA or ANDA number.6 
FDA listing requirements.  Section 510(b) of the FD&C Act requires firms 
(e.g., manufacturers) engaged in manufacturing, preparation, 
propagation, compounding, or processing drugs to register with the 
Secretary.7  In addition, section 510(j) of the FD&C Act requires these 
firms to list with the Secretary (i.e., report) all of the drugs they produce 
for commercial distribution.  These firms fulfill this requirement by 
providing drug-listing information to FDA.8   
Firms report drug information using national drug codes (NDC).  Each 
listed drug product is assigned a unique 11-digit, 3-segment NDC 
consisting of labeler, product, and package code segments.9  The first 
segment (the labeler code) identifies the firm that labels the drug and is 
assigned by FDA.  The second segment (the product code) identifies the 
drug formulation, and the third segment (the package code) identifies 
the package size.  The product and package segments are assigned by 
 
6 According to a section of FDAs Web site entitled How Drugs are Developed and 
Approved, new drugs, like other new products, are frequently under patent protection 
during development.  The patent protects the sponsors investment in the drugs 
development by giving it the sole right to sell the drug while the patent is in effect.  
Additionally, under certain circumstances, sponsors may receive a certain period of 
marketing exclusivity when their drugs are approved.  When a patent and exclusivity on 
brand-name drugs expires or has been successfully challenged, other firms can obtain FDA 
approval of an ANDA to sell generic versions of the drug.     
7 Pursuant to 21 CFR  207.21(a), firms first entering into the production of drugs must 
register within 5 days after beginning operations.   
8 Firms that distribute drugs produced by another firm under their own label may opt to 
submit listing information to FDA.  See 21 CFR  207.20(b).     
9 A complete NDC may be 10 or 11 digits.  Databases that list NDCs typically convert  
10-digit NDCs to 11-digit NDCs.  See 21 CFR 207.35(b)(2).      
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I N T R O D U C T I O N  
the firms.10  Each June and December, firms are required to report 
updated lists of their drugs, including certain information, such as 
newly introduced drugs, discontinued drugs, and material changes to 
other listing information previously submitted.11  As a result of these 
reporting timeframes, there is up to a two-quarter lag between the time 
a drug enters the market and the time it is required to be listed with 
FDA.  During this period, FDA may not have any record of the drug.    
The system FDA uses to collect and maintain drug-listing information 
from labelers is known as the Drug Registration and Listing System 
(DRLS).12  A drug product and its associated NDC may reside in one of 
the following databases within DRLS:  
  The DRLS Listings Tableincludes drug products (including 
prescription drugs as well as foreign and some domestic              
over-the-counter products), insulin, and certain biologics that are 
currently marketed and that have been successfully listed with 
FDA; this file is the source of the NDC Directory (described below) 
and includes approved NDA and ANDA numbers for each drug, 
where applicable. 
  The DRLS Discontinued Drug Fileincludes discontinued drug 
products that were listed with FDA but are no longer on the 
market (as reported by labelers).  
  The DRLS Pending Drug Fileincludes drug products for which 
the listing process has begun but is not complete. 
None of these databases is publicly accessible.  However, the NDC 
Directory, created from the DRLS Listed Drug File, is available for 
download from FDAs Web site.13  The NDC Directory is limited to 
prescription drugs and insulin products that have been manufactured, 
prepared, propagated, compounded, or processed by registered 
establishments for commercial distribution.  This database contains the 
 
10 21 CFR  207.35(b)(2)(ii).   
11 21 CFR  207.21(b) and 207.30 and section 510(j)(2) of the FD&C Act.  
12 According to FDA, the agency no longer accepts paper submissions for registration 
(unless a waiver is granted) and has transitioned to the electronic DRLS effective           
June 1, 2009.  Further, FDA states that electronic submissions have enabled it to 
implement fully automated validations for select data elements as well as allowed firms to 
voluntarily update their drug listing more often.   
13 The NDC Directory is available online at http://www.fda.gov.    
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I N T R O D U C T I O N  
NDC, approved application number, and drug product information for 
each drug listed.14    
FDA has additional databases containing approval information.  One of 
these contains data on biological products (such as vaccines and blood, 
among others,15 used in the prevention, treatment, or cure of a disease 
or condition).16  In addition, the FDA Approved Drug Products directory 
(Drugs@FDA) is a publicly available FDA database that provides each 
drugs approval history, including the FDA-approved label, and states 
whether it was approved under an NDA or ANDA; however, it does not 
list any of this information by NDC.17   
Medicaid Prescription Drug Coverage 
Title XIX of the Social Security Act (the Act) established the Medicaid 
program to pay for medical and health-related assistance for certain 
vulnerable and needy individuals and families.  This program is 
administered by States and financed with State and Federal funds.  
Individual States establish eligibility requirements, benefit packages, 
and payment rates for their Medicaid programs under broad Federal 
standards administered by the Centers for Medicare & Medicaid 
Services (CMS).  Currently, all 50 States and the District of Columbia 
provide coverage for prescription drugs under the Medicaid program.  
In 2008, Medicaid expenditures for prescription drugs totaled 
approximately $24 billion.18, 19   
 
 
14 According to FDA, NDC Directory updates are published online twice monthly.   
15 According to FDA, biological products are viruses, therapeutic sera, toxins, antitoxins, 
vaccines, blood, blood components or derivatives, allergenic products, proteins (except for 
any chemically synthesized polypeptides), or analogous products, or arsphenamine or 
derivatives of arsphenamine (or any other trivalent organic arsenic compound) applicable to 
the prevention, treatment, or cure of a disease or condition of human beings. 
16 Some biological products are also included in the NDC Directory.   
17 FDA, Drugs@FDA:  Frequently Asked Questions.  Accessed at http://www.fda.gov on 
November 9, 2009.  Drugs@FDA is searchable by drug name.  The Web site contains each 
drugs FDA-approved label, which is the official description of a drug product found inside 
drug packaging that includes indications for which the drug is approved, states who should 
take it, lists NDCs associated with the approval, lists adverse side effects, and provides 
other safety information. According to FDA, for some older drugs that have not had labeling 
supplements approved in recent years, the labeling may not in fact be on Drugs@FDA.        
18 For this report, our discussion of Medicaid payments and rebates refers only to         
fee-for-service Medicaid and does not include managed care.   
19 This amount was calculated using national summary data for 2008 and includes 
Federal and State payments.  Rebates collected by States under the Medicaid drug rebate 
program (MDRP) were not subtracted from this figure.   
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I N T R O D U C T I O N  
Medicaid Drug Rebate Program 
For Federal payment to be available for covered outpatient drugs 
provided under the MDRP, sections 1927(a)(1) and (b)(1) of the Act 
mandate that drug manufacturers enter into rebate agreements with 
the Secretary and pay quarterly rebates to State Medicaid agencies.  
Generally, covered outpatient drugs must be approved by FDA, with 
certain exceptions, to qualify for Federal payment.  Covered outpatient 
drugs are defined by section 1927(k)(2) of the Act as those drugs which 
are treated as prescribed drugs under section 1905(a)(12) and which 
are:   
  approved for safety and effectiveness as prescription drugs under 
sections 505 or 507 of the FD&C Act,  
  commercially used or sold in the United States before the date of 
enactment of the Drug Amendments of 1962 and which have not 
been the subject of a final determination by the Secretary, or  
  described in section 107(c)(3) of the Drug Amendments of 1962 and 
for which the Secretary has determined that there is a compelling 
justification for their medical need and for which a proposed order 
to withdraw approval has not been issued.20   
When a drug manufacturer initially seeks to enter into a rebate 
agreement with the Secretary, the manufacturer must provide its   
FDA-assigned labeler code (i.e., the first segment of the NDC) and a 
complete list of NDCs for drugs marketed by the company.  CMS 
compares this information to information that the manufacturer 
provides to FDA (e.g., data in the NDC Directory) to determine whether 
each drug meets the definition of a covered outpatient drug under the 
MDRP.21  Therefore, inaccuracies in FDAs databases could make it 
difficult for CMS to determine whether drugs should be paid for under 
the MDRP.   
Once a manufacturer gains entry into the MDRP, all of its drugs are 
subsequently covered under the rebate agreement.  New drugs from 
manufacturers with existing rebate agreements are automatically paid 
for under the MDRP (i.e., the manufacturer does not need to go through 
an additional approval process).  To verify the coverage status of these 
 
20 Covered outpatient drugs can also refer to certain biological and insulin products.  
21 CMS, National Drug Rebate Agreement.  Accessed at http://www.cms.hhs.gov on 
November 9, 2009.   
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new drugs, CMS compiles a list of their associated NDCs twice yearly.  
CMS provides this list to FDA to determine the drugs rebate eligibility 
and to determine whether they meet the definition of a covered 
outpatient drug (i.e., they are approved by FDA).   
Drugs Without FDA Approval 
According to FDA and CMS, there is no complete list of drugs that do 
not have FDA approval.  FDA relies on DRLS databases (including the 
NDC Directory), which the agency acknowledges may be incomplete and 
inaccurate, to determine whether a drug is approved.22, 23  According to 
FDA, one reason that the NDC Directory component of DRLS is neither 
fully accurate nor complete is that drug manufacturers do not always 
submit the required information.24  In addition, the presence of an NDC 
in the NDC Directory does not denote approval.25 
Congressional Interest in Drugs Without FDA Approval 
In a letter sent to CMS and FDA,26 a member of Congress expressed 
concern that Medicaid is being billed inappropriately for unapproved 
drugs.  In response, CMS began conducting research on the approval 
status of certain drugs to determine whether they are eligible for 
payment under the MDRP.  As a result of this effort, CMS has identified 
products27 that do not meet the definition of a covered outpatient drug 
(e.g., drugs that are not approved by FDA) and removed them from the 
MDRP.  In addition, FDA published a compliance policy guide in 2006 to 
explain how it intends to exercise its enforcement discretion with regard 
to drugs without approval.28  According to FDA, this compliance policy 
 
22 FDAs Response to Representative Edward J. Markey.  Accessed at 
http://www.ascp.com on February 18, 2010.  OIG, The Food and Drug Administrations 
National Drug Code Directory, OEI-06-05-00060, August 2006.   
23 According to FDA, the agency has implemented a pilot program and other data 
validations to examine the quality of data in the NDC Directory and compare these data to 
commercial databases.   
24 FDAs Response to Representative Edward J. Markey.  Accessed at 
http://www.ascp.com on February 18, 2010.  
25 21 CFR  207.39. 
26 Senator Charles Grassley.  Grassley Questions Government Response to the 
Marketing and Use of Unapproved Drugs.  Accessed at http://www.grassley.senate.gov on 
November 10, 2009. 
27 For example, in 2009, CMS sent letters to State Medicaid agencies and the 
manufacturers of sodium hyaluronate and ergotamine informing them that the agency was 
removing specific NDCs from the MDRP because these drugs did not meet the definition of 
a covered outpatient drug, i.e., they did not have the appropriate FDA approval status. 
28 FDA, Marketed Unapproved Drugs  Compliance Policy Guide,  440.100.  Accessed at 
http://www.fda.gov on November 9, 2009.  
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guide emphasizes that illegally marketed drugs must receive FDA 
approval.29  Finally, as previously mentioned, a member of Congress 
requested that OIG examine the FDA approval status of drugs paid for 
by Medicaid. 
Related OIG Work 
Previous OIG reports examined the completeness and accuracy of FDAs 
NDC Directory and identified factors that contribute to missing or 
obsolete product listings.30, 31  The most recent report (August 2006) 
found that the NDC Directory was incomplete (primarily because of 
insufficient reporting by drug manufacturers) and inaccurate (because it 
included drugs that were no longer on the market or were listed in 
error).  The report also found that FDAs lack of oversight contributed to 
inaccurate and incomplete information in its NDC Directory.   
Another recent OIG report found that there was a potential problem 
with Medicaid payment for drugs that do not have FDA approval.32  The 
reports objective focused on the accuracy of drug categorizations for 
Medicaid rebates.  However, a manual review of 75 NDCs with 
questionable drug categorizations revealed that over 40 percent were 
associated with unapproved drugs.  Based on the findings of that report, 
OIG recommended that CMS work closely with FDA to identify drugs 
not approved by FDA for safety and effectiveness.  In its response, CMS 
stated that it has worked and will continue to work closely with FDA to 
identify payments for drugs not meeting the definition of a covered 
outpatient drug.   
METHODOLOGY 
Scope 
This review determined the approval status of drugs paid for by 
Medicaid in 2008.  We examined only fee-for-service Medicaid payments 
for prescription drugs in the MDRP, i.e., we excluded Medicaid managed 
care and over-the-counter drugs from this analysis.  Further, we 
 
29 In general, FDA has used a risk-based enforcement approach to marketed unapproved 
drugs that includes efforts to identify illegally marketed drugs, prioritization of those drugs 
according to potential public health concerns, and regulatory followup.   
30 OIG, The Food and Drug Administrations National Drug Code Directory,               
OEI-06-05-00060, August 2006.   
31 OIG, The FDA Prescription Drug File, OEI-03-90-02300, November 1991. 
32 OIG, Accuracy of Drug Categorizations for Medicaid Rebates, OEI-03-08-00300,      
July 2009.   
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examined only approval status according to information available in the 
NDC Directory and Drugs@FDA.   
Data Sources 
We reviewed relevant laws, guidelines, regulations, and policies to 
obtain information about procedures related to the approval status of 
and payment for drugs in the MDRP.   
CMS data.  We obtained 2008 State utilization files for the MDRP from 
CMSs Web site in June 2009.33  Using these files, we obtained Medicaid 
expenditures and utilization data for 27,143 prescription drug NDCs in 
2008.  Medicaid payment for these NDCs totaled $23.8 billion.  See 
Appendix A for a more detailed description of the data collection and 
analysis. 
FDA data.  We downloaded FDAs NDC Directory (i.e., the publicly 
accessible file created from the DRLS Listed Drug File) in August 2009.  
The file was updated on July 31, 2009, and contains the name, NDC, 
and the approved application number (assigned by FDA) for each listed 
drug.  A number in the approved application number field signifies that 
the product has been approved by FDA for marketing based upon a 
review of its safety and effectiveness.  An other in this field signifies 
that listing information for the product did not include an approved 
application number; this product may not have been approved for safety 
and efficacy by FDA; or the data may have been omitted.34 
We also obtained the pending and discontinued files from DRLS, as well 
as a file containing biological products from FDA, in June 2009.35  These 
files contain the drug names, NDCs, and associated 
labelers/manufacturers.  We also downloaded two lists of approved 
biological products from FDAs Web site.  The lists contained the names 
and approved application numbers for certain biological products.36  We 
also used FDAs online searchable database Drugs@FDA during our 
 
33 These files were downloaded from http://www.cms.hhs.gov in June 2009 and contain 
State-reported expenditure and utilization data by NDC.  These data are not validated by 
CMS.     
34 During the period covered by this review, the application number for biologics was 
identified as other in the NDC Directory.  However, these products are now identified as 
biological licensing agreement (BLA), according to FDA.   
35 The NDC Directory used for this review was updated in July 2009.  The pending, 
discontinued, and biological files from FDA were updated in May 2009.   
36 FDA approves biologics with BLAs.  Many approved biologics are considered covered 
outpatient drugs under Medicaid.   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  8   
   
I N T R O D U C T I O N  
manual review.  The database contains a drugs approval status and 
history, is organized by product name, and is not searchable by NDC.    
Data Analysis 
NDC approval and listing.  We matched the 27,143 NDCs listed in the 
aggregated 2008 State Medicaid utilization file against FDAs NDC 
Directory to identify the number of NDCs reimbursed under the MDRP 
that (1) had an approved application number in the NDC Directory,     
(2) were listed in the NDC Directory but did not have an approved 
application number, and (3) were not listed in the NDC Directory at all.   
NDCs listed in the Directory without an approved application number 
generally had an application number of other indicating that the drug 
is not approved by FDA, may be subject to an efficacy and safety review, 
and/or may be one for which FDA lacks sufficient data.   
We also determined how many NDCs for which the application number 
was other were listed in the DRLS pending or discontinued files or 
FDAs biological file or were associated with drugs on FDAs approved 
biological products lists.37  For NDCs not listed in the NDC Directory, 
we determined how many were listed in the DRLS pending and 
discontinued files or FDAs biological file.   
Manual reviews.  We conducted two manual reviews:  one for NDCs with 
an application code of other and one for NDCs that were not listed in 
the NDC Directory or other DRLS files.  From the group of NDCs that 
had an application code of other and were not included in the other 
FDA files under review, we selected the 25 associated with the highest 
Medicaid expenditures for a manual review.  We reviewed the approval 
status and history on these drugs using Drugs@FDA to identify possible 
reasons for their lack of approval or determine whether they were 
misclassified by FDA.   
We conducted a similar manual review of the 25 NDCs with the highest 
Medicaid reimbursement that were not listed in the NDC Directory or 
other DRLS files.  We reviewed available drug product information in 
Drugs@FDA to identify the characteristics of these drugs and determine 
whether they were included in this database.   
 
37 FDAs biological file lists products by NDC.  In addition to identifying this database, 
we identified two lists of approved biological products.  FDAs lists of approved biological 
products contain the biological product names and approved BLAs; they do not include 
NDCs.  For this analysis, we identified all NDCs that had an approval code of other that 
were associated with drug names on one of these lists.    
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  9   
   
II NN TT RR OO DD UU CC TT II OO NN   
Limitations 
We did not verify the accuracy of CMSs Medicaid utilization data or any 
of FDAs files (i.e., DRLS files, biological files, lists of approved 
biological products).  The results of this review reflect the status of 
FDAs databases at the time they were updated (i.e., July 2009 for the 
NDC Directory and May 2009 for the pending, discontinued, and 
biological files).  The results of the manual review (which examined only 
a small number of high-expenditure NDCs) cannot be projected to the 
entire universe of NDCs.   
This review identifies the number of drugs that did not have an 
approved application number in the NDC Directory; it does not 
determine the appropriateness of Medicaid payment for these drugs.  
Additionally, we did not verify that the drugs with approved application 
numbers listed in the NDC Directory had actually been approved by 
FDA.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency.
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  10   
   
 F I N D I N G  
In 2008, Medicaid paid for 
Sixty-two percent of drugs paid for by Medicaid 
prescription drugs associated with 
in 2008 had an approved application number in 
27,143 NDCs (numeric drug 
the NDC Directory; the remaining 38 percent  identifiers) under the MDRP.  The 
either did not have an approved application  NDC Directory listed approved 
number listed or were not in the      application numbers for        
16,945 (62 percent) of these NDCs.  
NDC Directory at all 
Medicaid payment for these NDCs 
totaled $17.8 billion, or 75 percent of 2008 MDRP expenditures for 
prescription drugs.  The remaining 38 percent were (1) listed in the 
NDC Directory but did not have an approved application number or     
(2) not listed in the NDC Directory at all.  See Table 1 for additional 
information on drugs paid for by Medicaid.   
Table 1.  Approval and Listing Status of NDCs Paid for by Medicaid in 2008  
Number of  Medicaid 
Approval and Listing Status in NDC Directory 
NDCs  Payment Amount 
Application number is an approved new drug application or abbreviated new drug 
16,945  $17,808,828,801 
application. 
Application number is otherNDC is not found in DRLS pending file, discontinued 
2,426  $803,201,005 
y  file, FDA biological file, or list of approved biological products. 
r
o
ct
e
r
Di Application number is otherNDC is in DRLS pending file, discontinued file, FDA 
DC  biological file or NDC is associated with drugs on FDA list of approved biological  380  $1,542,121,481 
N products.38 
n 
d i
e
st
Li Application number is blank or approval status cannot be determined.  352  $924,301,493 
NDC is not listed in NDC Directory but is included in the DRLS pending file, 
n  3,893  $1,564,048,798 
ed i y  discontinued file, or FDA biological file. 
st or
Not LiNDC Direct NDC is not listed in the NDC Directory, DRLS pending file, discontinued file, or FDA  3,147  $1,117,824,229 
biological file. 
       Total  27,143  $23,760,325,807 
 Source:  OIG analysis of Medicaid utilization data, FDA DRLS databases, and biological files. 
 Note:  Totals may not add up because of rounding.    
 
38 Twenty of these NDCs were in the pending file, 21 were in the discontinued file, and      
339 were in the biological file or were associated with approved biological products.   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  11   
   
F I N D I N G  
Twelve percent of drugs paid for by Medicaid were listed in the NDC 
Directory but did not include an approved application number 
In 2008, Medicaid paid for 3,158 NDCs (12 percent of NDCs under 
review) that were listed in the NDC Directory but did not have an 
approved application number (i.e., the approved application number 
was other, was blank, or could not be determined).  Medicaid 
payments for these drugs totaled $3.3 billion (14 percent of Medicaid 
expenditures for prescription drugs) in 2008.   
More than three-quarters of these NDCs (2,426) had other listed in 
the approved application number field in the NDC Directory and were 
not included in the other FDA databases.  These NDCs did not appear 
in the pending, discontinued, or biological files or were not associated 
with drugs that were on FDAs list of approved biological products.  
Medicaid payments for drugs associated with these 2,426 NDCs totaled 
$803 million in 2008.   
Each of the remaining 732 NDCs had (1) an application number of 
other but was included in one of FDAs other databases, (2) an 
approval status that was blank, or (3) an approval status that could not 
be determined.   
The majority of these NDCs that underwent a manual review appear to be 
associated with approved application numbers.  A manual review of 25 of 
the 2,426 NDCs that were listed as other (and that were not included 
in the other FDA databases) indicates that 14 appear to be approved 
products.  Searching Drugs@FDA revealed that although the 
application numbers for these 14 NDCs were other on the NDC 
Directory, they were included on the drugs approved labels and appear 
to be approved products.  The information in the NDC Directory was 
likely inaccurate as it did not contain the appropriate approval 
information found in another FDA database.   
Three additional NDCs in this manual review appear to be associated 
with products approved by FDA.  However, FDAs databases did not 
contain enough information to verify approval.  Two of these NDCs are 
associated with approved products; however, the specific NDCs are not 
on the approved labels.  For the other NDC, Drugs@FDA contains an 
approved application number; however, there is no labeling information 
to verify the approval for the particular NDC. 
The remaining eight NDCs do not have any approval information 
available on Drugs@FDA, meaning the drugs potentially do not have 
FDA approval.  Based on information obtained from manufacturer        
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  12   
   
F I N D I N G  
Web sites, these drugs were enzyme replacement products, cough 
suppressants, antihistamines, and pain relievers.   
Twenty-six percent of drugs paid for by Medicaid were not listed in the NDC 
Directory; however, more than half of these drugs were listed in other FDA 
databases   
Over one quarter (7,040) of the 27,143 NDCs associated with drugs paid 
for by Medicaid in 2008 were not listed in the NDC Directory.  Medicaid 
expenditures for these drugs totaled $2.7 billion (11 percent of Medicaid 
prescription drug expenditures) in 2008. 
More than half (3,893) of these NDCs were listed in the pending, 
discontinued, or biological files.  The remaining 3,147 NDCs were not 
listed in any of these databases.  Therefore, FDA would be unable to 
determine their approval status based on the NDCs alone.  Medicaid 
payments for these 3,147 NDCs in 2008 totaled $1.1 billion.   
The majority of NDCs that underwent a manual review appear to be 
associated with approved application numbers.  A manual review of 25 of 
the 3,147 NDCs that were not listed in the NDC Directory or the 
pending, discontinued, or biological files indicates that many of these 
drugs may actually be approved products, further illustrating the 
incomplete nature of the NDC Directory.   
According to Drugs@FDA, 14 of the 25 unlisted NDCs that underwent 
manual review were included on approved labels (i.e., the                 
FDA-approved labels for the drugs contained the NDCs under review).  
These 14 drugs were associated with approved drug applications, even 
though they are not listed in the NDC Directory.  For 8 of the                       
11 remaining NDCs, the associated drug name appeared in Drugs@FDA 
but the specific NDC that underwent manual review was not included 
on the approved label (i.e., the drug itself is approved by FDA, but the 
specific NDC under review is not included on the approved label).   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  13   
   
RRR EEE CCC OOO MMM MMM EEE NNN DDD AAA TTT III OOO NNN    
 R E C O M M E N D A T I O N  
Generally, covered outpatient drugs must be approved by FDA to 
qualify for Federal payments under Medicaid.  Sixty-two percent of 
drugs paid for by Medicaid in 2008 had an approved application number 
in the NDC Directory.  However, data contained in the NDC Directory 
were inaccurate and incomplete, thereby preventing us from 
determining whether FDA approved the remaining 38 percent.  Twelve 
percent of NDCs under review did not have an approved application 
number listed in the NDC Directory, and an additional 26 percent were 
not listed in the NDC Directory at all.  As a result of this inaccurate and 
incomplete information, Medicaid could potentially pay for drugs that 
are not approved.  Without accurate approval and listing information, it 
is impossible to determine whether these drugs were appropriately paid 
for under the MDRP.   
This report highlights the fact that the NDC Directory cannot reliably 
be used to verify the approval and listing status of drugs paid for under 
the MDRP.  Previous OIG reports also found problems with the 
accuracy and completeness of the NDC Directory and recommended 
changes to improve the database.  Given the previous recommendations, 
the potential impact on beneficiary health and the integrity of Medicaid 
payments, we continue to recommend that FDA: 
Improve the completeness and accuracy of the NDC Directory  
FDA could take the following steps:    
  Conduct frequent reviews of its NDC Directory to ensure its 
completeness and accuracy   
According to FDA, the agency does not verify manufacturer data 
and does not follow up with manufacturers that do not list their 
data.  FDA could routinely review all listed NDCs that do not have 
an approved application number to identify drugs that may be 
approved but just missing approval data.  FDA could use the NDC 
Directory in conjunction with its other databases (e.g., 
Drugs@FDA) to identify the approval and listing status of certain 
drugs.  Further, FDA could use some of its other databases as well 
as national compendia to acquire readily accessible drug product 
data.  
  Work with CMS and Congress to seek a legislative or regulatory 
change that compels manufacturers to list all approved products with 
FDA before the products become eligible for Medicaid payment   
A legislative or regulatory change requiring manufacturers to list 
all approved products with FDA prior to being accepted into the 
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  14   
   
R E C O M M E N D A T I O N  
MDRP would reduce Medicaid payment for drugs lacking FDA 
approval.  By making payment under MDRP contingent upon 
listing, manufacturers would have an increased incentive to 
ensure that FDA has the most complete and timely information on 
the products in the NDC Directory. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments on our draft report, FDA generally agreed with OIGs 
recommendation to improve the completeness and accuracy of the NDC 
Directory.  FDA stated that it recognizes that data quality has suffered 
in the past, agrees that the accuracy and completeness of data in the 
NDC Directory are imperfect, and remains committed to robust quality 
improvements.  FDA noted that it has already begun implementing 
several initiatives for evaluating and enhancing the quality of            
drug-listing data.   
FDA has agreed that it should work with CMS to examine changes that 
could further strengthen CMSs ability to ensure that drugs are listed 
with FDA prior to reimbursement.  FDA stated that it was pleased that 
OIG, by encouraging collaboration, recognized that both FDA and CMS 
have a role in identifying drug products potentially eligible for CMS 
payments.  FDA then cited its collaboration with CMS on several 
related measures, including developing a list of drugs that are not 
properly listed with FDA and identifying the regulatory status of listed 
drug products.  In addition, FDA stated that it will identify new 
approaches it and CMS may use to reduce inappropriate reimbursement 
for drugs under Medicaid.   
FDA also stated that it is crucial to recognize that its efforts to enhance 
data quality remain limited by certain regulatory constraints, e.g., 
product-listing changes are required to be reported to FDA only twice 
yearly, which means listed information can quickly become inaccurate 
unless manufacturers voluntarily provide more frequent updates.  To 
that end, FDA noted that it has implemented an electronic reporting 
system for drug product information that may encourage manufacturers 
to update their listings more frequently.  FDA stated that clarifying its 
authority to remove listings that are incorrect or out-of-date would give 
it an efficient, powerful tool for prompting compliance and correcting 
errors or omissions.   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  15   
   
R E C O M M E N D A T I O N  
Additionally, FDA stated that it is important to note some data 
limitations to ensure that OIGs findings are not misunderstood.  
Specifically, FDA pointed out that OIGs manual review examined a 
small sample of NDCs, that most inaccuracies did not result in improper 
Medicaid payments, and that the NDC Directory is now more complete 
and accurate than at the time of OIGs review.   
OIG acknowledges that our manual review examined only a small 
number of NDCs and that the results from this portion of the analysis 
cannot be projected to the entire universe of NDCs under review.  Given 
the time-intensive nature of these manual reviews, we focused on a 
purposive sample of NDCs associated with the highest Medicaid 
expenditures.  Additionally, although the analysis did not determine 
whether there were improper Medicaid payments, it did highlight the 
incomplete and inaccurate nature of the NDC Directory and the 
subsequent vulnerability for the Medicaid program.  As outlined in the 
limitations on page 10, we acknowledge that the NDC Directory 
undergoes frequent updates and that it may thus become more complete 
and accurate over time.  However, our results reflect the state of the 
NDC Directory at the time of the review and show that in 2008 the NDC 
Directory did not contain approval or listing information for nearly       
40 percent of NDCs paid under Medicaid.  FDAs comments are 
provided in Appendix B. 
In its comments on our draft report, CMS deferred to FDA regarding 
the response to OIGs recommendation and stated that it will continue 
to work with FDA on issues related to drug approval and Medicaid 
reimbursement.  CMSs comments are provided in Appendix C.  
 
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  16   
   
I N T R O D U C T I O N  
 A P P E N D I X ~ A  
Detailed Methodology 
Redbook.  Redbook is a national drug compendium published by a 
private company (Thomson Healthcare) using data from such sources as 
drug manufacturers and the Food and Drug Administration (FDA).39  
National drug compendia provide access to drug-pricing and drug 
product data.  We obtained drug product and classification data from 
the first-quarter 2009 edition of Redbook.   
Centers for Medicare & Medicaid Services data.  We downloaded 2008 
State Medicaid utilization data from the Centers for Medicare & 
Medicaid Services (CMS) Web site in June 2009.  This file contains 
36,767 national drug codes (NDC) representing total Medicaid 
expenditures and utilization by NDC for 47 States in 2008.40  Based on 
CMSs recommendation, this review included only prescription drugs.  
We used drug product data from Redbook to exclude all nonprescription 
NDCs (i.e., over-the-counter drugs).  NDCs for which there was no drug 
product data in Redbook were excluded from our analysis.  As a result, 
there were 27,143 NDCs for prescription drugs associated with 
Medicaid payment in 2008.  Medicaid payment for these NDCs totaled 
$23.8 billion in 2008.  See Table A-1 for a detailed description of 
Medicaid utilization data.   
Table A-1.  2008 Medicaid Utilization Data 
Number of  Medicaid 
Category 
NDCs  Expenditures
NDCs in State Medicaid utilization files  36,767  $24,133,357,264
NDCs in State Medicaid utilization files and with 
32,701  $24,070,132,410
Redbook drug product data 
NDCs in Medicaid utilization files identified by 
27,143  $23,760,325,807
Redbook as prescription drugs 
Source:  Office of Inspector General analysis of 2008 State Medicaid utilization data.  
FDA data.  We downloaded FDAs NDC Directory in August 2009.  This 
version of the database was updated as of July 31, 2009.  The NDC 
Directory contains over 159,000 unique NDCs.  FDA staff also provided 
 
39 Publishers of compendia do not perform formal data reviews for every new release.  
Further, Redbook is not limited to products with FDAs approval.   
40 The remaining four States were not included in this analysis because they did not 
have any utilization data available on CMSs Web site at the time of download or did not 
participate in the Medicaid drug rebate program.   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  17   
   
A P P E N D I X ~ A  
the pending file and discontinued file as well as a database containing 
biological products.   
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  18  x 
A  P  PEN  D  B 
Food and Drug Administration Comments 
......... 
..,.'~
~
(' ;::::lzt-DRPARTMENTO_F_ H_EA_L_T"H A ND HUMAN_ ._SERV_ICES_  _________ 
Food and Drug Adl1)lnlstraUon 
Sl1vor Spring MD .20993 
DATE:  August 2,2010 
TO:  Deputy Inspector General 
FROM:  Plincipal Deputy Commissioner of Food and Drugs 
SUBJECT:  FDA's General Comments to OIG's Draft Report entitled, FDA's Approval Status 
a/Drugs Paid/or by Medicaid, OEI-03-08-00500 
FDA is providing the attached general and technical comments to the Office of Inspector 
General's draft report entitled: FDA's Approval Status 0/Drugs Paid/or by Medicaid, OEI-03
08-00500. 
FDA appreciates the opportunity to review and comment on this draft report before it is 
published. 
Joshua M. Sharfstein, M.D. 

Principal Deputy Commissioner ofFood and Drugs 

Attachment 
OEI030800500  FDA's ApPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  19   
   
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  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  24  x  c 
A  P  PEN  0 
Centers for Medicare & Medicaid Services Comments 
" 
/~.VI~.~ 
~. SERV;")C~~
(  DEPARTMENT OF HEALTH & HUMAN  ..: r f;' , r .....  Oentels for Medicar. & Medicaid Services
,~~.. 
.,  ". 
Administrator 
ZOIO AUG 21  ~.M 10: 11  Washington. DO 20201 
DATE: 
to:  Daniel R. LevinSon 

: Inspector(;enenil 

FROM: 	 Donald M. Berwick, M.D. 

Administrator 

SUBJECT:  Office of Inspector General (OlG) Draft Report: FDA's Approval Status of Drugs 

'Paid for by Medicaid (OEI-03-08-00500) 

Thank you for the opportunity to revie~ and comment on the qIG Draft Report entitled, "FDA's 
Approval Status ofDrilgs paid for by Medicaid" (OEI-03-0800500). The. OlO was asked to 
determine the Food and Drug Administration's (FDA) approval status ofdrugs paid for by Medicaid 
in 2008. The OlO found that 62 percent of drugs paid for by Medicaid in 2008 had an approved 
application number in the National Drug Code (NDC) Directory; the remaining 38 percent either did 
not have an approved application nwnber listed or were not in the NDC Directory at all. This report 
highlights the fact that the NDe Directory cannot be readily used to verify the approval and listing 
status ofdrugs under the MediCaid drug rebate program. The OIG had one recommendation that we 
address below.  . '  
OIG RecOmmendation 
'f!!e DIG recommendsthat the FDA Continue to improve the completeness and accuracy ofthe NDC 
Directory. OlO suggests that the .FDA could take the following steps to ensure that the NDC 
Directory is accurate and complete: 
 	 Conduct frequent 'reviews of its NDC Directory to ensure its completeness and accuracy. 
 	 Work with the Centers for Medicare & Medicaid Services (CMS) and Congress to seek a 
'legislative or regulatory change that compels manufacturers to list all approved products with 
FDA before the products become eligible for Medicaid payment By making payment under 
Medicaid contingent upon listing, manufacturers would have increased incentives to ensure 
that FDA has the most complete and timely information on the products in the NDC 
Directory. 
CMS Response 
eMS defers the response to this recommendation to the FDA. CMS will continue to work with the 
FDA on t4ese important issues to ensure protection of Medicaid payments and beneficiaries. eMS 
Iooksforward to providinginput on any legislative or regulatory change that the FDA implements in 
"order to' colllpel manufacturer;; ~o list all of their approved products with the FDA. 
C~sthanks the OIG for the oPI?0rtunity to review and comment on this draft report. 
OEI030800500  FDA's ApPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  25   
   
 A C K N O W L E D 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, Prescription Drug Pricing 
Unit.   
Edward K. Burley 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 
Roman Strakovsky; other central office staff who contributed include 
Kevin Manley.  
 
  OEI-03-08-00500  FDAS APPROVAL STATUS OF DRUGS PAID FOR BY MEDICAID  26   
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 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.