Over a period of three years, the state of Iowa failed to collect $709,000 worth of prescription-drug rebates from manufacturers.
Clark Kauffman/The Register
More than $700,000 in rebates initially went uncollected
For almost three years, the Iowa Department of Human Services neglected to collect rebates on pharmaceutical drugs purchased through Medicaid, costing Iowa taxpayers more than $700,000 in lost revenue.
The U.S. Department of Health and Human Services’ Office of Inspector General investigated the loss as part of a wide-ranging probe into uncollected drug rebates that the Medicaid program is entitled to receive.
Although Medicaid is a taxpayer-funded program, with the costs shared by the federal government and the states, it is managed by the individual states, some of which have not bothered to collect rebates for all of the drugs used by Medicaid beneficiaries.
That problem has been the focus of congressional probes and other government investigations for the past six years.
According to the inspector general, between March 2012 and December 2014 the Iowa Department of Human Services, which oversees Iowa’s Medicaid program, routinely failed to invoice drug manufacturers for rebates the state was entitled to collect.
That error cost the state of Iowa and the federal government $708,938 in lost revenue, the inspector general said in a formal report published this summer.
The total losses could be higher, however, because the inspector general confined its investigation to that particular 35-month period and says that before its probe was launched DHS “did not invoice manufacturers for any rebates” of that kind.
The federal share of the loss is $401,240, and the remainder is money that would have been retained by the state.
The inspector general has asked the state to reimburse the federal government for its share of the loss, as well as any losses that accrued after December 2014.
Federal Medicaid regulations that were first approved in the early 1990s, and then amended in 2005 and 2010, require the states to invoice drug manufacturers for rebates on drugs paid by Medicaid.
According to the inspector general, Human Services didn’t submit the rebate invoices for Iowa because, as of 2014, it was “still in the process of developing policies” to ensure that the invoices were correctly submitted.
In June 2003, the inspector general examined Human Services’ compliance with Medicaid drug rebate regulations and found that the Iowa agency had “perpetually understated” the amount of rebates it was owed and that a “lack of sufficient internal controls increased the risk for fraud, waste, or abuse of drug-rebate program funds.”
Human Services spokeswoman Amy McCoy declined to comment on the inspector general’s most recent report.
But in the agency’s formal, written response to the findings, Human Services said it had already reimbursed the federal government for $382,063 in losses and would soon pay the $19,177 balance.
The agency also said that after the inspector general began its investigation, Human Services began “reprocessing” rebates to recover some of what the Medicaid program was owed.
The agency also pointed out that with the April 2016 hiring of three new managed care organizations to administer Medicaid in Iowa, the responsibility for collecting the drug rebates now falls to those private MCOs.