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Audit (A-03-07-00203)

10-10-2008
Review of Medicaid Outpatient Drug Expenditures in Pennsylvania for the Period October 1, 2003, Through September 30, 2005

Executive Summary

The State's claims for reimbursement of Medicaid outpatient drug expenditures for fiscal years 2004 and 2005 did not fully comply with Federal requirements. Of the $1.96 billion ($1.1 billion Federal share) claimed, $4.4 million (Federal share) represented expenditures for drug products that were not eligible for Medicaid coverage. An additional $5.9 million (Federal share) represented expenditures for drug products that were not listed on the quarterly drug tapes. Because the State did not verify whether the drugs missing from the tapes were eligible for Medicaid coverage, these drug expenditures may not have been allowable for Medicaid reimbursement.

The State had inadequate controls to ensure that all of its outpatient drug expenditures complied with Federal requirements.

We recommended that the State refund $4.4 million to the Federal Government for drug expenditures that were not eligible for Medicaid coverage, work with CMS to resolve $5.9 million in payments for drugs that were not listed on the quarterly drug tapes and that may not have been eligible for Medicaid coverage, and strengthen internal controls to ensure that claimed Medicaid drug expenditures comply with Federal requirements.

In comments on our draft report, the State generally agreed with our recommendations and provided additional documentation to support $958,000 (Federal share) of its claim. We modified our finding accordingly and continue to support our recommendations.

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