Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

ACCURACY OF DRUG 


CATEGORIZATIONS FOR 


MEDICAID REBATES
 

Daniel R. Levinson
 

Inspector General 


July 2009
 

OEI-03-08-00300
 
 

 

 

 

 

 

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

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

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

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities. 
 

EXECUTIVE SUMMARY Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To determine whether the drug categorizations used to calculate 

Medicaid rebates are consistent with the categorizations listed in 

national compendia. 

BACKGROUND 

Medicaid is a health insurance program for certain low-income and 

medically needy people, jointly funded by Federal and State 

governments. Currently, all 50 States and the District of Columbia 

offer prescription drug coverage as part of their Medicaid benefit 

packages. In 2007, Medicaid expenditures for prescription drugs totaled 

$22 billion. 

For Federal payments to be available for covered outpatient drugs 

provided under Medicaid, sections 1927(a)(1) and (b)(1) of the Social 

Security Act (the Act) require drug manufacturers to (1) enter into 

rebate agreements with the Secretary of the Department of Health and 

Human Services and (2) pay quarterly rebates to State Medicaid 

agencies. In addition, covered outpatient drugs must be approved by 

the Food and Drug Administration (FDA) for safety and effectiveness, 

with certain exceptions, to qualify for Federal payments. As set forth in 

section 1927(b)(3) of the Act, manufacturers must provide the Centers 

for Medicare & Medicaid Services (CMS) with the average manufacturer 

price (AMP), by national drug code (NDC), for each of their covered 

outpatient drugs. 

The rebate amount for a drug is based in part on whether it is 

categorized as an innovator or a noninnovator product. For rebate 

purposes, innovators include both single-source (typically a brand-name 

product that has no available generic versions) and innovator multiplesource (typically a brand-name product that has available generic 

versions) products. Noninnovators are typically generic versions of 

multiple-source drugs. Manufacturers provide CMS with the drug 

categorizations for the NDCs of their covered outpatient drugs in 

conjunction with AMP data. Innovator products are generally subject to 

higher rebates than noninnovator products. 

We compared drug categorizations in CMS’s fourth-quarter 2007 AMP 

file (AMP file) to drug categorizations in two national compendia for 

more than 17,000 NDCs. National drug compendia are databases 

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E X E CUTIVE S U MMAR Y 

compiled by private companies using data from such sources as drug 

manufacturers and FDA. We then conducted a manual review of the 

drug categorizations for 75 nonmatching NDCs associated with high 

Medicaid expenditures, using information obtained from FDA’s Drug 

Information directories, FDA staff, and manufacturer Web sites. 

Further, we determined the percentage of NDCs with Medicaid 

utilization in the fourth quarter of 2007 that were not included in that 

quarter’s AMP file. 

FINDINGS 

Most AMP file drug categorizations matched the categorizations in 

two national compendia. For 90 percent of the 17,121 NDCs in our 

comparison, the drug categorizations in the fourth-quarter 2007 AMP 

file were the same as the categorizations in the national compendia. 

However, drug categorizations did not match for 1,730 NDCs. Overall, 

these nonmatching NDCs were associated with just 3 percent of total 

fourth-quarter 2007 Medicaid expenditures for the NDCs under review. 

A manual review of 75 of the 1,730 nonmatching NDCs found that 35 of 

the 75 nonmatching NDCs included in the manual review appear to 

have been correctly categorized in the AMP file under Medicaid rebate 

program requirements. This means that the drugs’ innovator status in 

the AMP file matched the drugs’ innovator status found in FDA’s Drug 

Information directories. 

Another 8 of the 75 drugs were associated with NDCs that appear to 

have been incorrectly categorized in the AMP file. These drugs were 

categorized as noninnovators in the AMP file but had been approved 

through new drug applications by FDA. It appears that under Medicaid 

rebate program requirements, these NDCs should have been 

categorized by their manufacturers as innovators. Because 

manufacturers pay smaller rebates for noninnovator drugs, States may 

not be receiving the rebates to which they are entitled for these eight 

NDCs. Fourth-quarter 2007 Medicaid expenditures for the drugs 

represented by these eight NDCs totaled nearly $14 million. 

The remaining 32 nonmatching NDCs in the manual review were for 

drugs not listed in FDA’s Drug Information directories. According to 

FDA, none of the drugs associated with these NDCs had been approved. 

Medicaid paid $20 million for these drugs in the fourth quarter of 2007. 

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E X E CUTIVE S U MMAR Y 

A substantial number of NDCs were excluded from the drug 

categorization comparison, primarily because of missing data. We 

were unable to compare drug categorizations for 42 percent (12,557 of 

29,678) of NDCs with fourth-quarter 2007 Medicaid utilization for 

several reasons: (1) the NDCs were not listed in the AMP file, (2) the 

NDCs were not listed in one or both of the two national drug compendia, 

or (3) the NDCs had drug categorization that differed in the two 

national compendia. These NDCs accounted for less than 10 percent of 

total Medicaid reimbursement for prescription drugs in the fourth 

quarter of 2007. 

We excluded 65 percent (8,101 of 12,557) of these NDCs from the 

comparison of drug categorizations because data were missing from the 

AMP file. Over half of these NDCs were also not listed in the previous 

quarter’s AMP file. For the remaining NDCs excluded from this 

comparison, 24 percent (3,031 of 12,557) were not listed in one or both of 

the national compendia. An additional 11 percent (1,425 of 12,557) of 

these NDCs were excluded because their innovator status in one 

compendium did not match their innovator status in the other. 

RECOMMENDATIONS 

We found that for the purposes of Medicaid drug rebates, manufacturers 

typically categorize their drugs in the same way as national compendia. 

Based on our review, most drug categorizations used to calculate 

Medicaid rebates appear to be correct. However, our manual review 

identified (1) a potential problem with Medicaid payment for drugs that 

do not have FDA approval and (2) instances in which certain drugs 

appear to have been categorized incorrectly in the AMP file, potentially 

resulting in a loss of rebates for States. Because we were able to 

identify these specific problems only for drugs that were included in our 

manual review of 75 nonmatching NDCs, it is likely that our findings 

understate the number of drugs that fit into each category. We will 

provide CMS with a list of the drugs that we identified as being 

unapproved or potentially miscategorized. 

Finally, we were not able to compare drug categorizations for a large 

number of NDCs, primarily because AMP data were missing. The 

absence of AMP data would likely inhibit CMS from calculating unit 

rebate amounts in a timely manner. In these cases, it is the States’ 

responsibility to collect any amounts that are owed. 

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E X E CUTIVE S U MMAR Y 

To address these issues, we recommend that CMS: 

Work closely with FDA to identify any potentially problematic Medicaid 

payments for drugs that have not been approved by FDA. 

Work with manufacturers to determine the correct categorizations of 

the drugs that we identified as being potentially miscategorized in the 

AMP file and assist States in collecting any unpaid rebates that they are 

owed. 

Continue to explore and undertake a range of efforts to ensure that 

drug manufacturers are submitting the required AMP data in a timely 

manner, including collaborating with the Office of Inspector General on 

administrative remedies for noncompliance. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS did not indicate whether it 

concurred with OIG’s three recommendations. However, CMS did note 

that it has taken and will continue to take steps related to each of OIG’s 

recommendations. 

CMS responded to our recommendation on potentially unapproved 

drugs by stating that it has worked and will continue to work closely 

with FDA to identify potentially problematic Medicaid payments for 

drugs that do not meet the definition of a covered outpatient drug. In 

its response to our recommendation on potentially miscategorized 

drugs, CMS stated that it is contacting the manufacturers for which 

OIG identified a potential problem with drug categorizations. CMS 

responded to our recommendation on timely reporting of AMP data by 

stating that it will continue to ensure that drug manufacturers are 

submitting the required AMP data in a timely manner. 

We ask that CMS indicate in its final management decision whether 

it concurs with each of our recommendations. Ongoing OIG work will 

further evaluate CMS’s and FDA’s ability to identify and remove 

drugs that may not be eligible for coverage under the Medicaid drug 

rebate program. In addition, OIG is exploring potential actions 

against manufacturers that fail to provide AMP data in a timely 

manner. 

OEI-03-08-00300 ACCURACY OF DRUG CATEGORIZATIONS FOR MEDICAID REBATES iv 
 

 

 

Δ TABLE OF CONTENTS 

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

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

FINDINGS ................................................ 11 
 

Most AMP file drug categories matched the drug categories in 

two national compendia ................................. 11 
 

A substantial number of NDCs were excluded from the drug 

category comparison, primarily because of missing data ....... 13 
 

RECOMMENDATIONS ..................................... 15 
 

Agency Comments and Office of Inspector General Response . . . 16 

APPENDIX ............................................... 18 
 

A: Agency Comments .................................. 18 
 

ACKNOWLEDGMENTS .................................... 21 
 
 

Δ INTRODUCTION 

OBJECTIVE 

To examine whether the drug categorizations used to determine 

Medicaid rebates are consistent with the categorizations listed in 

national compendia. 

BACKGROUND 

Medicaid Prescription Drug Coverage 

Medicaid is a health insurance program for certain low-income and 

medically needy people, jointly funded by Federal and State 

governments. Individual States establish eligibility requirements, 

benefit packages, and payment rates for their Medicaid programs under 

broad Federal standards. Currently, all 50 States and the District of 

Columbia offer prescription drug coverage as part of their Medicaid 

benefit packages. In 2007, Medicaid expenditures for prescription drugs 

totaled nearly $22 billion.1 

Medicaid Drug Reimbursement 

Medicaid beneficiaries typically receive covered drugs through 

pharmacies, which are reimbursed for these drugs by State Medicaid 

agencies. Generally, covered outpatient drugs must be approved by the 

Food and Drug Administration (FDA) for safety and effectiveness, with 

certain exceptions, to qualify for Federal payments.2 Reimbursement 

for covered outpatient prescription drugs is based on national drug 

codes (NDC), which are 11-digit identifiers that indicate the 

manufacturer, dosage form, and package size of each drug product. 

Federal regulations require, with certain exceptions, that each State’s 

reimbursement for a drug not exceed the lower of its estimated 

1 Centers for Medicaid & Medicare Services (CMS), “State Drug Utilization Data.” 

Available online at http://www.cms.hhs.gov/MedicaidDrugRebateProgram/SDUD/list.asp. 

Accessed on June 16, 2008. The figure does not include any rebates collected by States 

through the Medicaid drug rebate program. 

2 Exceptions include drugs which were commercially used or sold in the United States 

before the date of the enactment of the Drug Amendments of 1962; drugs for which the 

Secretary has determined there is a compelling justification for their medical need; drugs 

for which the Secretary has not issued a notice of an opportunity for a hearing on a 

proposed order of the Secretary to withdraw approval of an application because the 

Secretary has determined that the drug is less than effective; and drugs that have not been 

subject to a final determination that they are new drugs. 

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INTRODUCTION 

acquisition cost plus a reasonable dispensing fee or the provider’s usual 

and customary charge to the public.3 

CMS allows States flexibility when defining estimated acquisition cost. 

Each State is required to submit a Medicaid State plan to CMS 

describing its reimbursement methodology for covered drugs. States 

use a variety of mechanisms when setting drug reimbursement 

amounts. Currently, most States base their calculations of estimated 

acquisition cost on a drug’s average wholesale price (AWP) discounted 

by a certain percentage or its wholesale acquisition cost plus a certain 

percentage.4 For some multiple-source drugs, States also use the 

Federal upper limit and/or State maximum allowable cost programs in 

determining reimbursement amounts.5 

Medicaid Drug Rebate Program 

For Federal payments to be available for covered outpatient drugs 

provided under Medicaid, sections 1927(a)(1) and (b)(1) of the Social 

Security Act (the Act) require drug manufacturers to enter into rebate 

agreements with the Secretary of the Department of Health and Human 

Services and pay quarterly rebates to State Medicaid agencies. Under 

these rebate agreements and pursuant to section 1927(b)(3) of the Act, 

manufacturers must provide CMS with the average manufacturer price 

(AMP) by NDC for each of their covered outpatient drugs. As defined in 

section 1927(k)(1) of the Act, the AMP is the average price paid to the 

manufacturer of the drug in the United States by wholesalers for drugs 

distributed to the retail pharmacy class of trade. The AMP is 

determined without regard to customary prompt pay discounts extended 

to wholesalers. 

The AMP is calculated as a weighted average of prices for all of the 

manufacturer’s package sizes of a drug sold during a given time period 

and is reported for the lowest identifiable quantity of the drug 

3 42 CFR § 447.512. 

4 CMS, “Medicaid Prescription Reimbursement Information by State—Quarter Ending 

March 2008.” Available online at 

http://www.cms.hhs.gov/MedicaidDrugRebateProgram/downloads/RxReimbursementRateM 

arch2008.pdf. Accessed on June 13, 2008. 

5 States use the Federal upper limit and/or State maximum allowable cost programs to 

establish ceiling prices for certain multiple-source drugs. CMS has established Federal 

upper limit amounts for more than 500 drugs. Individual States determine the types of 

drugs included in their maximum allowable cost programs and the methods by which the 

maximum allowable cost for a drug is calculated. 

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INTRODUCTION 

(e.g., 1 milligram, 1 milliliter, 1 tablet, 1 capsule). Currently, 

manufacturers submit AMP data on monthly and quarterly bases, with 

submissions due 30 days after the end of the rebate period. 

In the Medicaid drug rebate program, drugs are generally categorized as 

one of three types: single-source, innovator multiple-source, or 

noninnovator multiple-source. Manufacturers provide CMS with the 

drug category for each of their NDCs in conjunction with AMP data. 

Generally, pursuant to section 1927(k)(7)(A) of the Act and 

42 CFR § 447.502, (1) a single-source drug is a covered outpatient drug 

produced or distributed under an original new drug application 

approved by FDA, including a drug product marketed by any crosslicensed producers or distributors operating under the new drug 

application; (2) an innovator multiple-source drug is a multiple-source 

drug that was initially marketed under an original new drug application 

approved by FDA; and (3) a noninnovator multiple-source drug is a 

multiple-source drug that is not an innovator multiple-source drug.6 7 

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. 

In addition to AMP, section 1927(b)(3) of the Act requires 

manufacturers of single-source and innovator multiple-source drugs to 

provide CMS with the best price available for each of its covered 

outpatient drugs. Best price is generally 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.8 Manufacturers of noninnovator multiple-source 

6 The regulation (42 CFR § 447.502) also generally provides that for drugs that entered 

the market in 1962 or later, a noninnovator multiple-source drug is a drug marketed under 

an abbreviated new drug application; for drugs that entered the market before 1962, it is a 

drug not originally marketed under an original new drug application. 

7 Pursuant to 42 CFR § 447.502, single-source and innovator multiple-source drugs also 

include covered outpatient drugs approved under product license approvals, establishment 

license approvals, or antibiotic drug approvals. Single-source drugs also include covered 

outpatient drugs approved under a biological license application. 

8 Section 1927(c)(1)(C)(i) of the Act. 

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INTRODUCTION 

drugs are not required to provide their best price. CMS maintains AMP 

and best price data as part of its quarterly AMP files (AMP file). 

Medicaid Drug Rebate Calculations 

The amount of rebates owed by manufacturers to State Medicaid 

agencies for a drug is determined by two figures: (1) the unit rebate 

amount of the drug and (2) the number of units of the drug reimbursed 

by the State in a given quarter. Pursuant to section 1927(c) of the Act, 

the formula used to determine the unit rebate amount depends on the 

drug category reported by the manufacturer. Under Medicaid rebate 

law, unit rebate amounts for single-source and innovator multiplesource drugs are calculated using the same formula. Therefore, for the 

purposes of this report, both single-source and innovator multiplesource drugs are hereinafter referred to as “innovator” products, while 

noninnovator multiple-source drugs are referred to as “noninnovators.” 

For innovator drugs, the unit rebate amount equals the greater of 

15.1 percent of the AMP or the difference between the AMP and best 

price.9 For noninnovator drugs, the unit rebate amount is 11 percent of 

the AMP.10 

At the end of every quarter, CMS calculates a unit rebate amount for 

each NDC included in the Medicaid drug rebate program and provides 

this amount to State Medicaid agencies. To determine total rebates due 

from manufacturers, the unit rebate amount is multiplied by the total 

number of units of the NDC reimbursed by the State during the 

quarter. 

In some cases, States may have reimbursed for drugs that do not have 

AMPs reported by the manufacturers in the given quarter. As a result, 

CMS is unable to calculate unit rebate amounts for the affected NDCs. 

However, States are still owed rebates for these drugs. CMS has 

instructed States to include the NDCs that have unit rebate amounts of 

zero because AMP data are missing or have been rejected as part of the 

quarterly rebate statement sent to manufacturers, listing the number of 

units of the NDC reimbursed by the State in the quarter.11 The 

9 Section 1927(c)(1)(A) of the Act.
 

10 Section 1927(c)(3) of the Act. 

11 CMS, “Medicaid Drug Rebate Program Bulletin for Participating Drug
 

Manufacturers,” Release Number 69. Available online at 

http://www.cms.hhs.gov/MedicaidDrugRebateProgram/03_DrugMfrReleases.asp. Accessed 

on December 12, 2008. 

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INTRODUCTION 

manufacturers calculate their own unit rebate amounts for the NDCs 

according to Medicaid drug rebate program rules and determine the 

total rebates owed based on the utilization provided.12 However, 

according to CMS staff, manufacturers do not always follow through 

with this process, causing States to expend substantial efforts to recoup 

the unpaid amounts.13 14 

Drug Compendia 

Drug compendia are databases compiled by private companies using 

data from such sources as drug manufacturers and FDA. National drug 

compendia are references for health care professionals that provide 

access to drug-pricing and drug category data. Two commonly used 

drug compendia on the market today are the Red Book (published by 

Thomson Healthcare) and the First DataBank National Drug Data File 

(First DataBank) (published by the Hearst Corporation). 

FDA Drug Information Directories 

FDA publishes information via several sources regarding drugs that it 

has approved. For example, FDA’s “National Drug Code Directory” 

(NDC Directory) is supposed to list the application numbers for NDCs 

associated with drugs approved by FDA.15 16 However, previous OIG 

work has found the NDC Directory to be incomplete, primarily because 

of insufficient reporting by drug manufacturers.17 In addition, FDA 

12 CMS, “Medicaid Drug Rebate Program Bulletin for Participating Drug 

Manufacturers,” Release Number 38. Available online at 

http://www.cms.hhs.gov/MedicaidDrugRebateProgram/03_DrugMfrReleases.asp. Accessed 

on October 24, 2008. 

13 Because States are responsible for tracking collections and reporting those amounts to 

CMS, the responsibility falls on States to collect the rebates owed to them when 

manufacturers do not follow through with this process. 

14 Previous Office of Inspector General (OIG) work found that many States do not receive 

all possible drug rebates from manufacturers because of missing AMP data. 

15 Available online at http://www.fda.gov/cder/ndc/index.htm. Accessed on 

October 10, 2008. 

16 FDA inputs the NDC and the information submitted as part of the listing process into 

a database known as the Drug Registration and Listing System (DRLS). Several times a 

year, FDA extracts some of the information from the DRLS database (currently, properly 

listed marketed prescription drug products and insulin) and publishes that information in 

the NDC Directory. 

17 OIG, “The Food and Drug Administration’s National Drug Code Directory,” 

OEI-06-05-00060, August 2006. 

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INTROD U C T I O N 

recently stated that the NDC directory is neither fully accurate nor 

complete.18 

The NDC Directory does not indicate whether the application numbers 

are for new drug applications (i.e., represent innovator drugs) or 

abbreviated new drug applications (i.e., represent noninnovator drugs). 

The FDA Approved Drug Products directory (Drugs@FDA) provides 

each drug’s approval history, including whether it was approved under 

a new drug application or an abbreviated new drug application; 

however, it does not list any of this information by NDC.19 Drugs@FDA 

is searchable by application number, proprietary drug name, and active 

ingredient; therefore, with information gathered from FDA’s NDC 

Directory, Drugs@FDA can be used to identify NDCs as innovators or 

noninnovators. 

METHODOLOGY 

Scope and Data Collection 

Scope. We reviewed only NDCs with Medicaid utilization in the fourth 

quarter of 2007 (October 1 to December 31). There were 29,678 NDCs 

with Medicaid utilization in the quarter under review. We were able to 

compare drug categorizations only if NDCs were present in all data 

sources. Therefore, any NDCs that were not listed in the fourth-quarter 

2007 AMP file or either of the two national drug compendia (Red Book 

and First DataBank) were excluded from our comparison. In addition, 

we excluded drugs whose drug categorizations differed in the two 

national compendia (i.e., drugs that were considered innovators in Red 

Book and noninnovators in First DataBank or vice versa). As a result of 

these steps, our comparison of drug categorizations included 

17,121 NDCs. These 17,121 NDCs accounted for 91 percent ($4.9 billion 

of $5.4 billion) of total Medicaid reimbursement for prescription drugs 

in the fourth quarter of 2007. 

Data collection. We identified all NDCs with Medicaid reimbursement 

in the fourth quarter of 2007 using CMS’s National Drug Utilization 

Database, which contains the Medicaid utilization and expenditures by 

18 FDA response to Representative Edward J. Markey. Available online at 

http://www.ascp.com/medicarerx/upload/FDAltrMerkey.pdf. Accessed on 

November 17, 2008. 

19 FDA, “Drugs@FDA: Frequently Asked Questions.” Available online at 

http://www.fda.gov/cder/drugsatfda/FAQ.htm. Accessed on September 22, 2008. 

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INTROD U C T I O N 

NDC.20 In February 2008, we obtained the Medicaid drug rebate 

fourth-quarter 2007 AMP file from CMS. We obtained variables that 

identify drug categorizations from fourth-quarter 2007 versions of two 

national drug compendia (Red Book and First DataBank). We also 

obtained information from FDA’s Drug Information directories (NDC 

Directory and Drugs@FDA) for use during our manual review of drug 

categorizations. 

Data Analysis 

Compendia data. Drug compendia do not contain individual drug 

category variables that identify NDCs as single-source, innovator 

multiple-source, or noninnovator multiple-source drugs, as defined by 

Medicaid drug rebate law. Therefore, we developed our own variable 

based on a combination of other variables contained in the compendia. 

For both compendia, we used the variable that identifies NDCs as 

brand-name or generic in conjunction with a variable that identifies 

NDCs as single-source or multiple-source to create our comparison 

variable. We used the following criteria for our categories: 

1.	 NDCs categorized as brand-name and single-source were considered 

single-source and therefore innovators for purposes of this analysis. 

2.	 NDCs categorized as brand-name and multiple-source were 

considered innovator multiple-source and therefore innovators for 

purposes of this analysis. 

3.	 NDCs categorized as generic and multiple-source were considered 

noninnovator multiple-source and therefore noninnovators for 

purposes of this analysis. 

As previously stated, to avoid potential confusion, NDCs for which 

drug categorizations differed in the two national compendia were 

excluded from further analysis of drug categorizations.21 

Comparison of drug categorizations. We compared the drug 

categorizations listed in national compendia to the drug categorizations 

in the AMP file for the 17,121 NDCs under review. We placed NDCs for 

20 CMS, “State Drug Utilization Data.” Available online at 

http://www.cms.hhs.gov/MedicaidDrugRebateProgram/SDUD/list.asp. Accessed on 

May 20, 2008. 

21 We excluded 1,425 NDCs from our analysis because the drug categorizations in Red 

Book did not match the drug categorizations in First DataBank. 

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 INTRODUCTION 

which the rebate categorizations in the AMP file did not match the 

compendia categorizations into one of two groups: 

1.	 NDCs categorized as noninnovator drugs in the AMP file but 

categorized as innovator drugs in drug compendia. 

2.	 NDCs categorized as innovator drugs in the AMP file but 

categorized as noninnovator drugs in drug compendia. 

We determined the potential effect of miscategorizations by calculating 

(1) the percentage of NDCs and (2) the percentage of total Medicaid 

reimbursement in the fourth quarter of 2007 associated with each group 

(i.e., innovators in the AMP file, noninnovators in drug compendia, and 

vice versa). 

Manual review. In addition to comparing Medicaid rebate 

categorizations to the two drug compendia, we conducted a manual 

review of 75 high-expenditure, nonmatching NDCs to address concerns 

that neither the AMP file nor drug compendia are completely accurate 

and reliable sources of drug category data. These 75 NDCs consisted of 

the 50 NDCs categorized as noninnovators in the AMP file (but 

innovators in compendia) and the 25 NDCs categorized as innovators in 

the AMP file (but noninnovators in compendia) with the highest 

expenditures in the fourth quarter of 2007. 

We identified reasons for any differences in drug categorizations by 

examining drug approval status and drug categorization data in FDA’s 

Drug Information directories. For each of the 75 NDCs included in our 

manual review, we used a two-step method to determine the correct 

drug category. First, we used FDA’s NDC Directory to search for the 

product’s application number. Because the application number alone 

does not identify an NDC as innovator or noninnovator, we then used 

the Drugs@FDA directory to identify whether the application numbers 

belonged to drugs that were approved under new drug applications 

(i.e., innovators) or abbreviated new drug applications 

(i.e., noninnovators). We considered the drug categorization in the AMP 

file to be correct only when its drug category corresponded to the 

appropriate approval status in the FDA directories.22 A small number 

22 Generally, under the Medicaid drug rebate program, drugs categorized as innovators 

have new drug applications and drugs categorized as noninnovators have abbreviated new 

drug applications (with certain exceptions). Section 1927(k)(7)(A) of the Act and 

42 CFR § 447.502. 

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INTRODUCTION 

of drugs associated with the 75 NDCs under review were not listed in 

FDA’s NDC Directory but were listed in Drugs@FDA. Although 

Drugs@FDA does not list drugs by NDC, we were able to verify the 

approval status of these NDCs using a combination of product and 

manufacturer data from the database.23 

For some of the NDCs included in our manual review, we were unable 

to locate information in any of FDA’s online sources. Therefore, a third 

step was necessary. We provided FDA staff with a list of these NDCs 

and obtained further information about the approval status and 

categorization for each of the associated drugs. We also obtained 

information about these NDCs from their manufacturers’ Web sites. 

Drugs not included in the AMP file and/or compendia. For some NDCs, we 

were unable to compare the Medicaid drug categorizations to those in the 

national compendia because the data were missing from at least one of the 

files. First, we calculated the percentage of NDCs with Medicaid 

utilization in the fourth quarter of 2007 that were not included in that 

quarter’s AMP file.24 We also determined whether any of the NDCs with 

missing fourth-quarter 2007 AMPs did not appear in the third-quarter 

2007 AMP file. Then, we calculated the percentage of NDCs with 

Medicaid utilization in the fourth quarter of 2007 that were missing from 

one or both of the national compendia. Finally, we calculated the 

percentage of NDCs with Medicaid utilization in the fourth quarter of 

2007 that were listed in both compendia, but the drug categorizations 

differed in each source. 

Limitations 

The editorial policies of national drug compendia permit submission of 

data from manufacturers, distributors, Government publications, 

internal research, and medical literature as sources of drug information. 

However, publishers of compendia do not perform formal data reviews 

for every new release. We did not verify the accuracy of data provided 

by First DataBank or Red Book. In addition, we did not verify the 

accuracy of the data provided by CMS or FDA. More current AMP data 

may have become available after we completed our analysis. For 

23 Drugs@FDA is searchable by application number, proprietary drug name, or active 

ingredient. 

24 According to CMS Drug Rebate Program Release No. 69, individual State Medicaid 

agencies are responsible for collecting rebates for NDCs with Medicaid utilization that are 

not included in the AMP file. 

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INTRODUCTION 

example, the fourth-quarter 2007 AMP file provided to us by CMS on 

February 2, 2008, may have been updated after our analysis was 

completed. 

The eligibility for Medicaid payments of the unapproved drugs 

identified by our manual review is beyond the scope of this study. We 

did not determine whether any Federal funds were used to pay for 

drugs that were not approved by FDA. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency (now 

the Council of the Inspectors General on Integrity and Efficiency). 

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FINDINGS 

 

 

 

 

Δ FINDINGS 

For 90 percent of the 17,121 NDCs in 

our comparison, the drug 

Most AMP file drug categories matched the drug 

categories in two national compendia 

categorizations in the fourth-quarter 

2007 AMP file were the same as the categorizations in the national 

compendia. Drugs with matching categorizations accounted for 

97 percent of Medicaid expenditures for the NDCs under review. In the 

AMP file, 29 percent of the 17,121 NDCs under review were categorized 

as innovators, and 71 percent were categorized as noninnovators. 

However, as shown in Table 1, there were 1,730 NDCs (10 percent of 

NDCs in our comparison) whose drug categorizations in the AMP file 

did not match the drug categorizations in the national compendia. The 

nonmatching NDCs represented 12 percent of the NDCs categorized as 

innovators in the AMP file and 9 percent of the NDCs categorized as 

noninnovators in the AMP file. Overall, these nonmatching NDCs were 

associated with 3 percent ($146 million of $4.9 billion) of the total 

fourth-quarter 2007 Medicaid expenditures for the NDCs under review. 

Table 1. Comparison of Drug Categorizations in the AMP File and Two National Drug Compendia 

AMP Drug Categorization Number of NDCs That 

Matched Compendia Drug 

Categorization 

Number of NDCs That Did 

Not Match Compendia 

Drug Categorization 

 Total Number of NDCs by 

AMP File Drug 

Categorization 

Innovator (single-source, innovator 

multiple-source) 4,389 585 4,974 

Noninnovator 11,002 1,145 12,147 

Total 15,391 1,730 17,121 

OIG analysis of data contained in AMP file, Red Book, First DataBank. 

A manual review of 75 of the 1,730 nonmatching NDCs indicates that 

many drugs identified as such in Table 1 may have been correctly 

categorized for rebate purposes.25 As Table 2 illustrates, several factors 

contributed to nonmatching drug categorizations in the AMP file and 

national compendia, including (1) questionable categorizations in 

compendia (i.e., correct categorizations in the AMP file),26 (2) incorrect 

25 Our manual review comprised the top 50 nonmatching NDCs (by total Medicaid 

expenditures in the fourth quarter of 2007) categorized as noninnovators in the AMP file 

and the top 25 nonmatching NDCs (by total Medicaid expenditures in the fourth quarter of 

2007) categorized as innovators in the AMP file. 

26 Because compendia are not required to categorize drugs according to Medicaid rebate 

law, it would be erroneous to refer to these cases as “incorrect” in the compendia. 

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F I NDING S 

categorizations in the AMP file, and (3) the presence of unapproved 

drugs in the AMP and Medicaid reimbursement files. 

Table 2. Reasons for Nonmatching Drug Categorizations Between AMP File and National Compendia 

AMP Drug Categorization Questionable in 

Compendia (Correct in 

AMP File) 

Incorrect in AMP 

File 

Unapproved Drugs Total Nonmatching 

NDCs Reviewed 

Innovator (single-source, 

innovator multiple-source) 25 0 0 25 

Noninnovator 10 8 32 50 

Total 35 8 32 75 

OIG analysis of data contained in AMP file, Red Book, First DataBank, Drugs@FDA, and NDC Directory. 

Nearly half of nonmatching NDCs that we reviewed appear to have been 

categorized correctly in the AMP file 

Thirty-five of the seventy-five nonmatching NDCs that underwent 

manual review appear to have been correctly categorized in the AMP 

file according to Medicaid drug program requirements 

(i.e., categorizations in the compendia were questionable). This number 

includes all 25 nonmatching NDCs categorized as innovators in the 

AMP file (but noninnovators in the compendia). Each of the drugs 

represented by these NDCs had been approved through a new drug 

application according to Drugs@FDA. 

Further, 10 of 50 nonmatching NDCs categorized as noninnovators in 

the AMP file (but innovators in the compendia) had been approved 

through abbreviated new drug applications, according to Drugs@FDA. 

According to Medicaid drug program requirements, it appears that 

these NDCs were also categorized correctly in the AMP file. 

A small number of nonmatching NDCs that we reviewed resulted from 

apparent incorrect drug categorizations in the AMP file 

Eight of seventy-five NDCs that underwent manual review appear to 

have been incorrectly categorized in the AMP file. All eight of these 

NDCs were categorized as noninnovators in the AMP file but had been 

approved through new drug applications according to Drugs@FDA. It 

appears that under Medicaid drug program requirements, these NDCs 

should have been categorized by their manufacturers as innovators. 

Because manufacturers pay smaller rebates for noninnovator drugs, 

States may not be receiving the amount of rebates to which they are 

entitled for these eight NDCs. Fourth-quarter 2007 Medicaid 

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FINDINGS 

expenditures for the drugs represented by these eight NDCs totaled 

nearly $14 million. 

Over 40 percent of nonmatching NDCs that we reviewed were for drugs not 

approved by FDA 

Thirty-two of the seventy-five NDCs (43 percent) that underwent 

manual review corresponded to drugs not listed in FDA’s Drug 

Information directories. Each of these nonmatching NDCs was 

categorized as a noninnovator in the AMP file and an innovator in the 

compendia. According to FDA, none of the drugs associated with these 

NDCs had been approved. Based on information obtained from FDA 

staff and manufacturer Web sites, the unapproved drugs indentified by 

our manual review were enzyme-replacement products awaiting new 

drug application approvals, multivitamins (prenatal or otherwise), 

cough suppressants, antihistamines, or hydrating lotions. Medicaid 

paid $20 million for drugs associated with these 32 NDCs in the fourth 

quarter of 2007.27 

We were unable to compare drug A substantial number of NDCs were excluded categorizations for 42 percent from the drug category comparison, primarily (12,557 of 29,678) of NDCs with 

because of missing data fourth-quarter 2007 Medicaid 

utilization for several reasons: (1) the NDCs were not listed in the AMP 

file, (2) the NDCs were not listed in one or both of the two national drug 

compendia, or (3) the NDCs had drug categorizations that differed in 

the two national compendia. NDCs in these three groups accounted for 

less than 10 percent of total Medicaid reimbursement for prescription 

drugs in the fourth quarter of 2007. 

Lack of data in the AMP file accounted for most of the excluded NDCs 

We excluded 65 percent (8,101 of 12,557) of the NDCs from the 

comparison of drug categorizations because data were missing from the 

AMP file. Fourth-quarter 2007 payments for these NDCs totaled 

$338 million. More than half of these NDCs were also not listed in the 

previous quarter’s AMP file. According to CMS staff, States sometimes 

face difficulty in obtaining the rebates owed for products with late or 

missing AMP data. 

27 Generally, for Medicaid Federal financial participation to be available, most covered 

outpatient drugs must be approved by FDA for safety and effectiveness, with certain 

exceptions. 

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FINDINGS 

For the remaining NDCs excluded from this comparison, 

3,031 (24 percent of excluded NDCs) were not listed in one or both of the 

national compendia.28 These NDCs accounted for $60 million in 

Medicaid payments in the fourth quarter of 2007. An additional 

1,425 NDCs (11 percent of excluded NDCs) were excluded because their 

innovator status in one compendium did not match their innovator 

status in the other. These NDCs accounted for $99 million in Medicaid 

payments in the fourth quarter of 2007. Table 3 provides a statistical 

breakdown of the reasons we excluded NDCs from our comparison of 

drug categorizations. 

Table 3. Reasons for Exclusion of NDCs From the Drug Categorization Comparison 

Reason for Exclusion From Analysis Number of NDCs Excluded Medicaid Expenditures in the 

Fourth Quarter of 2007 

NDC missing from AMP file 8,101 $338,017,282 

NDC not listed in one compendium or both compendia 3,031 $59,823,807 

NDC’s drug categorization differed in the two national 

compendia 1,425 $99,353,525 

Total 12,557 $497,194,614 

OIG analysis of data contained in AMP file, Red Book, First DataBank, and Medicaid’s fourth-quarter 2007 National Utilization File. 

Note: Medicaid expenditures are rounded to the nearest dollar. 

28 Of the 3,031 NDCs excluded from our comparison because compendia data were 

missing, 2,916 were listed in one of the two national compendia. Only 115 of the NDCs 

were missing from both. 

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Δ RECOMMENDATIONS 

For this review, we compared drug categorizations in the fourth-quarter 

2007 AMP file to those in two national drug compendia. Because each 

drug’s innovator status determines the rebate amount paid by the 

manufacturer to State Medicaid agencies, incorrect drug categorizations 

could reduce Medicaid drug rebates paid to States. We found that for 

the purposes of Medicaid drug rebates, manufacturers typically 

categorize their drugs in the same way as national compendia. In other 

words, most drug categorizations used to calculate Medicaid rebates 

appear to be correct. 

However, in our manual review of 75 nonmatching NDCs, we identified 

a potential problem involving unapproved drugs: Medicaid paid 

$20 million in the fourth quarter of 2007 for 32 drugs that were not 

approved by FDA. These products may not be currently eligible for 

Federal payment under Medicaid because of their FDA approval status. 

According to FDA, unapproved drugs pose a significant health risk 

because they may not meet modern standards for safety, effectiveness, 

quality, and labeling. Further, FDA has noted that many health care 

providers may be prescribing unapproved drugs because they are 

unaware of the drugs’ approval status. 

Our manual review of 75 NDCs revealed eight instances in which 

certain drugs appear to have been categorized incorrectly in the AMP 

file, potentially resulting in a loss of rebates for States. Although total 

Medicaid expenditures for these eight NDCs were relatively small 

($14 million in one quarter), manufacturers may still owe States that 

reimbursed for these products higher rebates than the amounts that 

States collected. 

In both cases, the figures presented in our findings were limited to 

drugs included in our manual review of 75 high-expenditure 

nonmatching NDCs and are therefore likely to understate the actual 

amount spent on all drugs that fit into each category. We will provide 

CMS with a list of the drugs that we identified as being unapproved or 

potentially miscategorized. 

Finally, we were not able to compare categorizations for a large number 

of NDCs, primarily because AMP data were missing. The lack of AMP 

data would likely inhibit CMS from calculating unit rebate amounts in a 

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RECOMMENDATIONS 

timely manner. In these cases, States are responsible for collecting any 

amounts that are owed. 

To address the issues raised in this report, we recommend that CMS: 

Work closely with FDA to identify any potentially problematic 

Medicaid payments for drugs that have not been approved by FDA. 

Work with manufacturers to determine the correct categorizations of 

the drugs that we identified as being potentially miscategorized in the 

AMP file and assist States in collecting any unpaid rebates that they are 

owed. 

Continue to explore and undertake a range of efforts to ensure that 

drug manufacturers are submitting the required AMP data in a timely 

manner, including collaborating with OIG on administrative remedies 

for noncompliance. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS did not indicate whether it 

concurred with OIG’s three recommendations. However, CMS did note 

that it has taken and will continue to take steps related to each of OIG’s 

recommendations. 

CMS responded to our recommendation on potentially unapproved 

drugs by stating that it has worked and will continue to work closely 

with FDA to identify potentially problematic Medicaid payments for 

drugs that do not meet the definition of a covered outpatient drug for 

the purposes of the Medicaid drug rebate program. CMS explained 

that FDA provides it with information on unapproved drugs that may 

be ineligible for coverage under the Medicaid drug rebate program. 

CMS reviews that information and determines whether action should 

be taken to remove these drugs from the list of covered drugs. 

In its response to our recommendation on potentially miscategorized 

drugs identified in the AMP file, CMS stated that it is contacting the 

manufacturers for which OIG identified a potential problem with 

drug categorizations. If CMS determines that a manufacturer has 

miscategorized a drug and additional rebates are due, it will work 

with that manufacturer to ensure that a revised categorization is 

submitted so that the manufacturer can pay States appropriate 

rebates. CMS also noted that it has been working with 

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RECOMMENDATIONS 

manufacturers to correctly categorize drugs that manufacturers 

themselves have identified as being misreported. 

CMS responded to our recommendation on timely reporting of AMP 

data by stating that it will continue to ensure that drug 

manufacturers are submitting the required AMP data in a timely 

manner. To that end, after each quarter, CMS contacts drug 

manufacturers that have failed to submit timely AMP data to remind 

them of their responsibilities and request that their data be 

submitted immediately. In addition, on a quarterly basis, CMS 

provides OIG with a list of drug manufacturers that have failed to 

report timely data for two or more quarters in a four-quarter period 

for further investigation and/or review. CMS states that OIG may 

impose civil monetary penalties for manufacturers that appear on this 

quarterly report and indicated that issuing these penalties would 

assist in ensuring that drug manufacturers submit their required 

pricing data in a timely manner. 

We ask that CMS indicate in its final management decision whether 

it concurs with each of our recommendations. Ongoing OIG work will 

further evaluate CMS’s and FDA’s ability to identify and remove 

drugs that may not be eligible for coverage under the Medicaid drug 

rebate program. In addition, OIG is exploring potential actions 

against manufacturers that fail to provide AMP data in a timely 

manner. 

The full text of CMS’s comments is provided in Appendix A. 

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DAT

TO:

FROM:

MAY 18 2009

Daniel R, Levinson

Inspector General

C~lA~"b-0~ Charlene Fnzzera

Acting Administrator

~ters for Medicare & Medicaid Serv,ces

(',-.

) 200 Independence Avenue SW

2D09 MAY 19 PI: 12: /2 Washington, DC 20201

;(. .

GEI'IER /\L

S BJECT: Office ofInspector General (OIG) Draft Report: 'Accuracy of Drug

Categorizations for Medicaid Rebates" (OEI-03-08-00300)

Thank you for the opportunity to review and comment on the OIG Draft Report entitled

"Accuracy of Drug ategorizations for Medicaid Rebates" (OEI-03-08-00300), The purpose of

this report was to determine whether the drug categorizations used to calculate Medicaid rebate

are consistent with the categorizations listed in national compendia.

The OIG report pre ents findings that compare drug categorizations used to determine Medicaid

rebates to dJUg categorizations in two widely used national compendia. The rebate amount for a

drug is based on whether the drug is categorized as a ingle-source, innovator multi-source, or

non-innovator multiple-source drug product.

Drug categorizations in the fourth-quarter 2007 average manufacturer price (AMP) file were

compared to drug categorizations in two national compendia for more than 17,000 national drug

codes (N DCs). A manual revicw was conducted of the drug categori".ation for 75 non-matching

ND a sociatcd with high Medicaid expenditures using infomlation obtained from the Food

and Drug Administration's (FDA) Drug lnfonnation directories, FDA staff, and manufacturcr

Web sites. The report also dctermined lhe percentage of DCs with Medicaid utilization in the

fourth-quarter of 2007 that were not included ill that quarter' AMP file.

ror 90 percent of DCs, it was found that the drug categorizations in thc fourth-quarter 2007

AMP file were the same as the categorizations in thc national compendia. Drug categorizations

did not march for 10 percent of DCs, Overall these non-matching NDCs were a ociated with

3 percent of total fourth-quarter 2007 Medicaid expenditures for the DCs under review. A

manual review of75 high-expenditure non-matching DCs revealed that 32 NDCs were for

drugs that had not been approved by the rDA.

OIG Recommendation

The Centers for Medicare & Medicaid ervices (CM ) should work closely with the Food and

Drug Administration (FDA) to identify ally potentially problematic Medicaid payment for drugs

that have not be n approved by the FDA.

Δ APPENDIX~A

Agency Comments 

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I'age 2 - Daniel R. Levinson

CMS Response

The eMS has been and will continue to work closely with the FDA to identify potentially

problematic Medicaid paymcnts for drugs that do not meet the definition of a covered outpatient

drug for purposes of the Medicaid Drug Rebate Program (MDRP). FDA provides CMS with

information on unapproved drugs that may be ineligiblc for coverage under the MDRP, CMS

reviews that information and determines whether action should be taken to remove the drug.

CMS also works with the FDA to identify similar drugs that might also be ineligible for coverage

undcr the MDRE'. Thc FDA gencrally identifies a drug based on pharmaceutical ingredients, and

CMS identifics NDCs in the MDRJl that may contain those ingredicnts. Subsequently, these

products are also removed from the list of covered drugs in the MDRI' and CMS notifies States

and thc affected labelers of this action.

OIG Recommendation

CMS should work with manufacturers to determine the correct categorizations ofthe drugs that

we identified as being potcntially miscategori7..ed in the AMP filc and assist Statcs in collecting

any unpaid rcbates that they are owed.

CMS Response

Wc are pleased that the 010 found that almost all drugs were correctly classified. Nevertheless,

we want to ensure that manufacturers correctly repon their drug classification, and we are in the

process of contacting those manufacturers where the 010 has identified a potential problem. If

we determine that a manufacturer has miscategori7..cd a drug and additional rebates are due, we

will work with the manufacturer to ensure that a revised classification is submiued so that

manufacturers can pay States the appropriate rebates. We note that it is the manufacturer's

responsibility to submit data to eMS that reflects the FDA's approval process for the drug and

not to rely solcly on other infonnation such as that in the compendia.

We have also been working with manufacturers to correctly categorize drugs that have been

misreported. When a manufacturer identifies that a product has been miscategorized, we review

the product and detennine whether the manufacturer has identified the correct drug product

catcgory. If the drug is miscategorizcd, CMS requests that the manufacturer provide information

in support of a specific drug category, thc effective date ofthe change, and the financial impact

as a result of this change. CMS will then usc the FDA databases to determine the correct drug

category based on the FDA drug application number and verify that the NDC is listed in the

FDA National Drug Code Directory.

OIG Recommendation

CMS should continue to explore and undenake a nmge of efforts to ensure that drug

manufacturers are submitting the required AMP data in a timely manner. including collaborating

with the 010 on administrative remedies for noncompliance.

A P P E N D I X ~ A 

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Page 3 - Daniell{, Levinson

eMS Response

The eMS will continue to ensure that drug manufacturers arc submitting the required AMI' data

in a timely manner, including collaborating with the DIG to notify them of instances of

manufacturcr noncompliance with respect to timely data submission. Currently, after each

quarterly data submission deadline, CMS contacts drog manufacturers that have failed to submit

timely pricing data to remind tbem oftheir data submission responsibilities and request that their

data be submitted immediately.

The CMS also includes data reporting status infonnation in the Drug Data Reporting System

application so that, upon logging into the application, labelers may identify what thc next

reporting due dates are and how much data the labeler has submitted and certilied (Le., whether

or not the labeler is oul ofcompliance with their data reporting requirements). In addition, on a

quarterly basis, CMS reports to the DIG the drug manufacturers that havc failed to report timely

data for two or more quarters in a four-quarter period for further investigation and/or review. It

is our understanding that the DIG may impose civil monctary penalties for the manufacturers that

appear on this quarterly report, and CMS believes that the issuance ofsuch penalties would assist

further in ensuring that drug manufacturers submit their required pricing data timely.

The CMS would, again, like to thank the DIG for their efforts in reviewing the accuracy of drug

categorizations for Medicaid rebates. eMS will continue to work closely with the FDA 10 ensure

that manufacturers have correctly reported their drug classifications and that drug manufactures

are submitting the required AMP data in a timely manner. We have received the list of

manufacturers from the DIG and arc in the process of planning to contact those manufacturers

regarding polential drug misclltegorizalions. Furthermore, we will continue to collaborate with

the DIG regarding administrativc remedies for nOJlcompliance. eMS is committed to ensuring

the accuracy of drug categorizations and al1 Medicaid rebate data,

A P P E N D I X ~ A 

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ΔΔ ACKNOWLEDGMENTS APPENDIX~B APPENDIX~A 

 

 

Δ 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, 

Prescription Drug Pricing Unit. 

Roman Strakovsky served as the lead analyst for this study. Other 

principal Office of Evaluation and Inspections staff from the 

Philadelphia regional office who contributed to the report include 

Edward Burley; other central office staff who contributed include 

Lyn Killman. 

OEI-03-08-00300 ACCURACY OF DRUG CATEGORIZATIONS FOR MEDICAID REBATES 21