Department of Health and Human Services 

OFFICE OF

INSPECTOR GENERAL

 

Daniel R. Levinson 

Inspector General 

 

June 2011 

OEI-03-09-00410 

 

STATES’ COLLECTION OF 

MEDICAID REBATES FOR 

PHYSICIAN-ADMINISTERED 

DRUGS 
 

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 EXECUTIVE SUMMARY

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 drug’s 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 State’s 

policies, procedures, and controls used to process physicianadministered 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 
 

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EXECUTIVE SUMMARY

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 DRA’s 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 DRA’s 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 DRA’s 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 DRA’s 

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 physicianadministered 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, 
 

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EXECUTIVE SUMMARY

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 physicianadministered 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 physicianadministered 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 
 

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EXECUTIVE SUMMARY

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 DRA’s

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 DRA’s 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 DRA’s 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 
 

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EXECUTIVE SUMMARY

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 

CMS’s 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.
 

 TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................ ..... i

INTRODUCTION ............................................ 1 

FINDINGS ................................................. 13

By June 2009, 73 percent of responding States reported 

meeting or exceeding the DRA’s 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

RECOMMENDATIONS ..................................... 23

Agency Comments and Office of Inspector General Response.... 26

APPENDIXES ............................................. 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

ACKNOWLEDGMENTS ..................................... 43
 

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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.

 INTRODUCTION
 

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INTRODUCTION

strength, dosage form, and formulation of the product for a particular 

firm; and (3) the product’s package size. By implementing the DRA’s 

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

Medicaid Drug Rebate Program

 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. 

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

Medicaid Drug Rebate Process

and approximately 

550 pharmaceutical companies, participated in the rebate program.

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.
 

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INTRODUCTION 

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 invoice’s postmark date, after which

interest begins to accrue (see Figure 1 for a depiction of the rebate 

process).9

 

 1. Average Manufacturer Price/Best Price Data

4. Rebate

3. Rebate

Invoice With 

Utilization Data

2. Calculated Unit 

Rebate

Amount

Manufacturer

Figure 1: Medicaid Drug Rebate Process

CMS

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.
 

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INTRODUCTION

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 DRA’s 

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 drug’s name, route of administration, and dosage size, 

but does not identify the manufacturer or package size.
 

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INTRODUCTION 

that were billed using only HCPCS codes for single-source drugs could 

generally link the codes to NDCs using CMS’s 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 DRA’s 

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

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.

 This list was most recently updated in 

January 2011 and, for each of the 20 multiple-source drugs, contains 

the corresponding HCPCS code, the drug’s description, the HCPCS 

dosage, the drug name, any associated NDCs, and the manufacturer

name. 

24, 25

19 CMS creates a quarterly crosswalk file that links drug HCPCS codes to their 

applicable NDCs.

 The new 

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.
 

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INTRODUCTION

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

CMS Actions To Assist States in Meeting the DRA Rebate Requirements

 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.

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

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.

 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.

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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INTRODUCTION 

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

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 

 Subsequent 

to that report, the DRA imposed the rebate requirements for

physician-administered drugs.

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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INTRODUCTION

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 CMS’s definition of a physician-administered drug, 

consistent with section 1927(k)(2) of the Act.
 

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INTRODUCTION

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 

That Provided 

Data

Number of States 

That Did Not 

Provide Data

The amount paid for physician-administered drugs 45 3 

The amount paid and the amount of rebates requested for 

physician-administered drugs

37 11* 

The amount paid, the amount of rebates requested, and the 

amount of rebates collected for physician-administered drugs

26 22 

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 DRA’s 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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INTRODUCTION

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 physicianadministered drugs, particularly with crossover claims and claims 

submitted by 340B entities. 

Data Analysis

DRA’s requirements for rebate collection of physician-administered drugs. 

We identified the number of States that reported (1) meeting 

the DRA’s 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 DRA’s rebate collection requirement 

(i.e., collected rebates on all physician-administered drugs); or (3) not 

meeting the DRA’s 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 DRA’s 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

DRA’s 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 DRA’s 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 DRA’s rebate requirements. 

41 States were required to comply with the DRA’s 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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INTRODUCTION

enable NDC collection. We then determined from the surveys what 

these changes entailed. 

Dollar amount of rebates requested and collected

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). 

. 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. 

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 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. 

. 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. 
 

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INTRODUCTION

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 

reported meeting or exceeding the DRA’s 

requirement to collect rebates for certain 

physician-administered drugs 

 FINDINGS

As of June 30, 2009, 36 of the 

49 responding States (73 percent) 

reported being in full 

compliance with the DRA’s 

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 DRA’s requirements by collecting rebates on all 

physician-administered drugs.42

Table 2: State-Reported Compliance With DRA Rebate Requirements 

as of June 2009

Source: OIG analysis of State responses to survey question, 2010.

Among the 13 States that reported not collecting rebates in accordance 

with the DRA’s 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 

Rebates Collected Number of States

All physician-administered drugs 31 

All single-source and the top 20 multiple-source, physician-administered drugs 5 

Some physician-administered drugs, but did not meet the DRA’s requirement 12 

Did not collect any rebates for physician-administered drugs 1 

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 DRA’s rebate collection requirements.
 

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FINDINGS

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 

DRA’s 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 DRA’s 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 DRA’s 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. 
 

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FINDINGS

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 physicianadministered 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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FINDINGS

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 Maryland’s 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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FINDINGS

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 

Requested

Amount of Rebates 

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 State’s 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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FINDINGS

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. 

Twenty-nine States reported difficulties with 

nonpayment of the requested rebates for 

physician-administered drugs

In total, 29 of 48 States54

reported difficulties with 

manufacturer nonpayment of

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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FINDINGS

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 drug’s 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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FINDINGS

corresponding NDC. However, a few of these States reported that 

CMS’s 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

Eighteen States reported that Medicare crossover claims for 

physician-administered drugs do not typically include NDCs

 This could improve the efficiency of rebate collections by 

assisting States in tasks such as claim validation and unit-of-measure

conversions. 

When submitting crossover claims, Medicare providers are required to 

enter NDCs and the corresponding quantities on claims for physicianadministered 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 physicianadministered drugs. 

57 Numbers relating to crosswalk files may be higher because States were never 

explicitly asked on our survey about issues with CMS’s 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.
 

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FINDINGS

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 manufacturer’s 

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

Thirty-one States had not implemented certain 

steps necessary for collecting rebates on all 

eligible physician-administered drugs 

purchased by 340B entities

Physician-administered drug 

claims submitted by a 340B 

entity generally do not 

qualify for rebates because 

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

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 

 

For example, States identify claims submitted by 340B entities and 

exclude these from rebate invoicing. 

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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FINDINGS

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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FINDINGS RECOMMENDATIONS

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 DRA’s 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 data’s 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 DRA’s 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: 
 

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RECOMMENDATIONS

Take action against States that do not meet the DRA’s 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 DRA’s 

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 State’s collection rate. To alleviate these difficulties, 

CMS could encourage States to take advantage of the agency’s 

Medicaid Drug Rebate Dispute Resolution Program. 
 

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RECOMMENDATIONS

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 NDC’s 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 DRA’s 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 
 

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RECOMMENDATIONS

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 file’s 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 
 

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RECOMMENDATIONS

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 

CMS’s 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 DRA’s NDC

requirements should not need to rely on the crosswalk to properly 

collect rebates. Although CMS’s assertion is accurate, not all States 

fully met the DRA’s 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 CMS’s comments, see Appendix D.
 

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 APPENDIX ~ A

 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

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.

 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. 

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

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.

. CMS uses the manufacturer-reported AMP data and 
 

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APPENDIX ~ 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 drug’s 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 inflationadjusted 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.
 

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 APPENDIX ~ 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

State Physician-Administered Drugs for 

Which States Collected Rebates in the 

First Half of 2009

Did the State Require National 

Drug Codes on 

Physician-Administered Drug 

Claims as of June 2009?

State’s Action When a National Drug 

Code Was Not Included on a Claim as of 

June 2009

AK All physician-administered drugs Yes

Crosswalks the Healthcare Common 

Procedure Coding System (HCPCS) codes

to national drug codes (NDC) for 

single-source drugs; denies for 

multiple-source drugs

AL2

 

All single-source and the 20 highest dollar 

volume multiple-source, 

physician-administered drugs Yes

Crosswalks HCPCS to NDC for

single-source drugs; denies for

multiple-source drugs

AR All physician-administered drugs Yes Denies the claim

CA3 All physician-administered drugs Yes Denies the claim

CO

All single-source and the 20 highest dollar 

volume multiple-source, 

physician-administered drugs Yes

Crosswalks HCPCS to NDC for 

single-source drugs; denies for the required 

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)

IA

All single-source and the 20 highest dollar 

volume multiple-source, 

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

KY

All single-source and the 20 highest dollar 

volume multiple-source, 

physician-administered drugs Yes Denies the claim

 continued on next page 
 

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APPENDIX ~ B

Table B-1: Detailed Description of Responses From States That Reported Meeting the 

DRA’s Rebate Requirements for Physician-Administered Drugs as of June 2009 

(Continued)

State Physician-Administered Drugs for 

Which States Collected Rebates in the 

First Half of 2009

Did the State Require National 

Drug Codes on 

Physician-Administered Drug 

Claims as of June 2009?

State’s Action When a National Drug 

Code Was Not Included on a Claim as of 

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

NC

All single-source and the 20 highest dollar 

volume multiple-source, 

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. 
 

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APPENDIX ~ B

Table B-2: Detailed Description of Responses From States That Reported Not Meeting 

the DRA’s Rebate Requirements for Physician-Administered Drugs as of June 2009

State Physician-Administered Drugs for 

Which States Collected Rebates in the 

First Half of 2009

Did the State Require National 

Drug Codes on 

Physician-Administered Drug 

Claims as of June 2009?

State’s Action When a National Drug 

Code Was Not Included on a Claim as of 

June 2009

DC No rebate collection No NDC required No rebate collection

FL

All physician-administered drugs with an 

NDC and single-source drugs that can be 

crosswalked to an NDC 

No NDC required for institutional 

claims

Crosswalks the HCPCS to the NDC for 

single-source drugs; for multiple-source 

drugs, denies professional claims; pays 

institutional and 340B claims regardless 

of NDCs 

LA1 For professional claims only

No NDC required for institutional 

claims Denies professional claims only

ME2

All physician-administered drugs for 

professional claims; only the top 

20 multiple-source, 

physician-administered drugs for 

institutional claims

No NDC required for institutional 

claims for single-source drugs

Except for single-source institutional 

claims, denies the claims 

MI3

All single-source drug claims and 

multiple-source outpatient claims Yes

Denies all single-source drug claims; denies

professional claims for multiple-source drugs 

(but pays institutional claims for 

multiple-source drugs)

MO

All outpatient physician-administered 

drugs and the top 20 inpatient drugs Yes

Crosswalks the HCPCS to the NDC for 

single-source drugs; in certain cases, pays 

providers on a HCPCS with no NDC for 

multiple-source drugs 

NE

All physician-administered drugs if an 

NDC is submitted Yes

Crosswalks the HCPCS to the NDC for 

single-source drugs; for multiple-source 

drugs, attempts to contact provider for the 

NDC; otherwise, pays the claim and collects 

no rebate

NJ4

All physician-administered drugs if an 

NDC is submitted

No NDC required for institutional 

claims Denies professional claims only

NM5

All physician-administered drugs if an 

NDC is submitted No NDC required

Crosswalks the HCPCS to the NDC for 

single-source drugs; for multiple-source 

drugs, attempts to contact provider for the 

NDC; otherwise, pays the claim and collects 

no rebate

 continued on next page 
 

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APPENDIX ~ B

Table B-2: Detailed Description of Responses From States That Reported Not Meeting 

the DRA’s Rebate Requirements for Physician-Administered Drugs as of June 2009 

(Continued)

State Physician-Administered Drugs for 

Which States Collected Rebates in the 

First Half of 2009

Did the State Require National 

Drug Codes on 

Physician-Administered Drug 

Claims as of June 2009?

State’s Action When a National Drug 

Code Was Not Included on a Claim as of 

June 2009

NY6

All single-source and the 20 highest dollar 

volume multiple-source drugs if an NDC is 

submitted No NDC required

Crosswalks the HCPCS to the NDC for 

single-source drugs; for multiple-source 

drugs, pays the claim and collects no rebate 

OR7 All single-source drugs only Yes

 Crosswalks the HCPCS to the NDC for 

single-source drugs (no edit that denies

physician-administered drug claims)

TN

Physician-administered drugs if an NDC is 

submitted Yes

 Pays the claim, but does not invoice for a 

rebate

TX Outpatient claims only Yes

 Crosswalks to the NDC for single-source 

drugs; denies claims for multiple-source 

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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 APPENDIX ~ 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

 continued on next page 
 

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APPENDIX ~ 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. 
 

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APPENDIX ~ C

Table C-2: Data Reported by States Without Complete First- and Second-Quarter 2009

Rebate Collection Information for Physician-Administered

State Amount Reimbursed

Rebates 

Requested

Rebates 

Collected Reason for Missing Data

AK $23,430,017 $1,407,365

DK1

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of nearly 100 percent

AL $8,973,445 $2,651,094 DK

Could not differentiate between physician-administered and 

all other Medicaid claims

CT DK $6,551,347

DK

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of 67 percent

DE $1,683,131 $216,430 DK

Could not differentiate between physician-administered and 

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

KY $14,780,463 $1,272,449

DK

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of nearly 100 percent

MI $30,647,239 $8,720,352

DK

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of nearly 98 percent

MO $16,881,431 DK DK

Could not differentiate between physician-administered and 

all other Medicaid claims

NE2 $3,641,198 DK DK

Reported unit conversion inaccuracies in the rebate data, 

but working with manufacturers to make adjustments 

NH $14,960,227 $1,205,831 DK

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of nearly 100 percent

NJ $3,514,685 DK DK

For rebates requested, reported inaccuracies with the data; 

for rebates collected, could not differentiate between 

physician-administered and all other Medicaid claims 

 continued on next page 
 

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APPENDIX ~ C

Table C-2: Data Reported by States Without Complete First- and Second-Quarter 2009

 Rebate Collection Information for Physician-Administered Drugs (Continued)

State Amount Reimbursed

Rebates 

Requested

Rebates 

Collected Reason for Missing Data

NV DK DK DK

Could not differentiate between physician-administered and 

all other Medicaid claims for reimbursement and rebates 

requested; rebates collected amount was an estimate

OK DK DK DK

Could not differentiate between physician-administered and 

all other Medicaid claims

SC $114,155,241 $6,901,292 DK

Could not differentiate between physician-administered and 

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

VA $12,280,254 $6,954,167 DK

Could not differentiate between physician-administered and 

all other Medicaid claims, but provided an estimated rebate 

collection rate of nearly 100 percent

VT $1,651,481 $487,043 DK

Could not differentiate between physician-administered and 

all other Medicaid claims

 

 Total $354,597,303 $56,982,977

Could not 

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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APPENDIX ~ C

 

 Table C-3: Data Reported by States That Did Not Invoice for Physician-Administered 

 Drug Rebates During the First and Second Quarters of 2009

State Amount Reimbursed

Rebates 

Requested

Rebates 

Collected Reason for Missing Data

DC $999,379 $0 $0 Did not collect rebates

IL $47,461,395 $0 $0 At the time of this study, this State had not yet billed 

first- and second-quarter 2009 rebates

RI $3,497,104 $01 $0 At the time of this study, this State had not yet billed 

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.

 
Centers 10' Medica,e & Medicaid Services

Administrator

Washington, DC 20201

DATE: MAR 2 3 2011

TO: Daniel R. Levinson

Inspector General

FROM: Donald M. Berwick, M,D:

Administrator

SUBJECT: Office of Inspector General (OIG) Draft Report: "States' Collection of Medicaid

Rebates for Physician-Administered Drugs" (OEI-03-09-0041 0)

Thank you for the opportunity to review and comment on the subject OIG draft report. The

purpose of this report was to determine the compliance of States with the Medicaid drug rebate

requirements for physician-administered drugs.

The Deficit Reduction Act of2005 (ORA) specifically requires that States collect rebates on

claims for certain physician-administered drugs for Federal matching funds to be available. The

ORA also mandated that claims for physician-administered drugs include national drug codes

(NOCs), thereby allowing States to invoice manufacturers that are responsible for paying rebates.

Since the passage of the ORA, the Centers for Medicare & Medicaid Services (CMS) has taken

many steps to ensure that States are meeting the new rebate requirements for physicianadministered drugs.

OJG Findings

The OIG found that as of June 2009, 42 of 49 responding States reported meeting the ORA's

requirement to collect NDCs on claims for physician-administered drugs. The findings noted

that States may have collected OCs for physician-administered drugs and still not have met the

ORA's rebate collection requirements. By June 2009,73 percent of responding States reported

meeting or exceeding the ORA's requirement to collect rebates for certain physicianadministered drugs. Specifically, 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 dolJar volume, as required by the ORA. An additional 12 States reported

collecting rebates on a subset of physician-administered drugs, but were not in full compliance

with the ORA's rebate requirements. Only I State reported that it did not collect rebates on any

physician-administered drugs.

 

 APPENDIX ~ D 

Agency Comments 

 O E I - 0 3 - 0 9 - 0 0 4 1 0 S TATES ’ C OLLECTION OF MEDICAID REBATES FOR P HYSICIAN - ADMINISTERED DRUGS 39 

 
 

OEI - 0 3 - 0 9 - 00410 S TATES ’ C OLLECTION OF MEDICAID R EBATES FOR P HYSICIAN - A DMINISTERED D RUGS 40

APPENDIX ~ D
 

OEI - 0 3 - 0 9 - 00410 S TATES ’ C OLLECTION OF MEDICAID R EBATES FOR P HYSICIAN - A DMINISTERED D RUGS 41

APPENDIX ~ D
 

OEI - 0 3 - 0 9 - 00410 S TATES ’ C OLLECTION OF MEDICAID R EBATES FOR P HYSICIAN - A DMINISTERED D RUGS 42

APPENDIX ~ D
 

OEI - 0 3 - 0 9 - 00410 S TATES ’ C OLLECTION OF MEDICAID R EBATES FOR P HYSICIAN - A DMINISTERED D RUGS 43

APPENDIX ~ D ACKNOWLEDGMENTS

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.
Office of Inspector General http://oig.hhs.gov 

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amended, is to protect the integrity of the Department of Health and Human Services 

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