Government Watchdog Taking Close Look at Medicaid Drug Rebates


It’s never a good sign when the government comes knocking at your door with a lot of questions. It’s usually a sign that something has gone wrong, and that appears to be the case for the Medicaid drug rebate program. The Health and Human Services Office of Inspector General recently announced it would conduct several reviews of the program, prompted by congressional concerns the program paid too much for EpiPens.

Both the Senate Finance Committee and the House Energy and Commerce Committee called for the reviews earlier in the year. The committees said the drug rebate program had misclassified EpiPen and other drugs as generics instead of brand-name drugs, resulting in lower rebate payments from the drug manufacturers.

I spoke with Ellyn Sternfield, a health-care attorney with Mintz Levin in Washington, who told me she expects the new reviews might not have much impact, since past reviews of the program have led to little change. Sternfield said the OIG reviewed drug misclassification in a July 2009 report and told the Centers for Medicare & Medicaid Services it had some concerns over classification accuracy.

Sternfield said it’ll be interesting to see if the new reports include details on what the CMS did, or didn’t, do on drug classification after the 2009 report.

The new OIG reviews will take a look at the CMS’s accuracy in classifying drugs in the rebate program, the Food and Drug Administration approval process for drugs paid for by Medicaid and how reasonable manufacturers are when setting drug prices for the rebate program.

The Medicaid drug rebate program helps offset the cost of Medicaid prescription drugs. Drug manufacturers pay a 23.1 percent rebate for brand-name products and a 13.1 percent rebate for generics.

Stay on top of new developments in health law and regulation with a free trial to the Health Law Resource Center.

Learn more about Bloomberg Law and sign up for a free trial.