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The state’s Medi-Cal pharmacy leaders are working on settling disputes that surround $495 million in prescription drug rebate money, funds that are gaining lawmakers’ attention as the budget crisis grinds forward.
Medicaid officials in nearly every state negotiate with big drug companies for drug rebates in return for supplying billions worth of medications to needy patients.
Drug companies can dispute those payments – or the state’s calculation of the quantity of drugs used – throwing millions of dollars potentially owed to the state in limbo.
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In California, a staff of 13 sort through disputes filed by more than 400 companies and follow a process laid out in a 1990 law to recover the funds. Norman Williams, spokesman for the Department of Health Care Services, which operates Medi-Cal, recently said the disputed amount is at $495 million, some of it based on disputes that date back to the early 1990s.
The disputed funds have been a perennial topic of state and federal audits, which have found that all but four states fall short in their process of collecting the money. California stands out the most, though, negotiating the heftiest rebates but also leaving the greatest amount of money in the disputed category.
The Joint Legislative Audit Committee discussed the disputed rebates about a month ago during a hearing that focused on more than a billion dollars that the state could potentially recover.
State Auditor Elaine Howell told lawmakers that the disputed funds had added up to about $260 million for the years 2002 through 2006.
“We think the department really needs to be as aggressive and assertive as it can,” Howell told the committee.
Assemblywoman Alyson Huber, D-El Dorado Hills, also weighed in. “That to me just sounds like lost opportunities for us to go after some money,” she said. (Huber’s office said Friday that they are working with the department to take steps to recover the funds.)
Pilar Williams, the Medi-Cal pharmacy benefits chief, responded to the committee, pointing out that her department has only 13 employees to deal with disputes that can arise over the 32 million pharmacy claims the agency processes per year.
She said the claims come in constantly. And she said disputes can arise when drug makers reprice drugs or when federal funders adjust drug pricing. Additionally, she said some disputes arise over state errors.
“We are very much so working very, very actively in recouping the money that is owed to the state,” she said.
Norman Williams, the department spokesman, said staff are initially in charge of dealing with disputes, which can also be negotiated by Pilar Williams, the department chief. Federal Medicare regulators also deal with some disputes.
He said the disagreements are not typically dealt with in administrative or state courts.
State and federal audits have zeroed in on California and other states' rebate collections, as well as drug makers' pricing methods. Findings have included:
- In 2002, the Bureau of State Audits found that the Medi-Cal program had approval for nearly five years to fill positions in its drug rebate dispute resolution unit. But while the positions went unfilled, the disputed amount reached $216 million from 1991 to 2001.
- A 2004 state audit found that the agency had not completed a staffing study to determine how many employees it needed to resolve rebate disputes within 90 days. Since the earlier audit, staff were occupied resolving the older disputes that had arisen from 1991 to 2001.
- A 2005 Government Accountability Office report found a lack in consistency in how drug makers calculate the prices they charge state Medicaid programs, leading to inconsistency in rebate payments.
- A 2008 audit from the federal Health and Human Services inspector general recommended that California use its state hearing mechanism to resolve longstanding disputes. That audit found $835 million in drug rebate money was outstanding and $535 million of that was overdue.
- A 2008 audit of nearly all U.S. states found that 37 sent unreliable information to the federal government, 27 inappropriately calculated interest payments owed by drug makers and 17 states had an inadequate drug rebate collection system.
Norman Williams said state officials have addressed auditors concerns regarding staffing and are working to resolve the disputes.
Going forward, much of the state drug rebate money will flow to the federal government as a means of paying for health reform.
For now, though, the state can’t work hard enough to recoup the money. Some advocates are rallying around far smaller amounts of money for programs that help elderly patients in nursing homes resolve claims of abuse or give foster children leaving state custody assistance with rent or vocational education.
Anthony Wright, director of the nonprofit Health Access, said the state should turn over every rock to collect funds after it cut dental coverage from about 3 million low-income adults. The state is facing additional Medi-Cal cuts that would leave diabetic adults without test strips to monitor their blood sugar and disabled adults without wheelchairs.
“The more aggressive we are in getting rebates, the more we can prevent or restore cuts to beneficiaries in Medi-Cal,” he said.
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