Directs the department of health to establish a Medicaid drug rebate remittance demonstration program to determine whether duplicative claims have been submitted

Section one of the bill establishes the Medicaid drug rebate remittance demonstration program to work collaboratively with third party vendors to validate existing Medicaid drug rebate claims to determine whether the data contains duplicate claims or claims on which rebates may already have been paid all or in part to Medicare Part D plans or some other third parties in order to rectify disputed claims. It also sets forth the parameters of the demonstration program and the information required to be shared with drug manufacturers and third party vendors. It states that the Department of Health shall provide prescription drug utilization information to participating drug manufacturers who have entered into a rebate agreement with the Department and third party data vendors at no cost to the Department. In addition, it sets forth reporting requirements and recommendation options by the Department of Health. The Department shall report on the results of the program to the Governor, the Director of the Division of the Budget, the state Comptroller, and the Legislature on or before December 31, 2017.

Section two provides the effective date which is immediate.

Justification

In early 2015, the Office of the New York State Comptroller concluded, after conducting an audit of the Department of Health ("DOH"), that DOH "has not taken appropriate steps to maximize rebate collections on drugs dispensed to individuals enrolled in managed care." Moreover, the Comptroller found that due to "ineffective policies and processes, as well as untapped rebate opportunities, the Department did not collect as much as $119.3 million in available rebates for the Medicaid program during" the period of October 2011 through June 2014. The Comptroller made a dozen recommendations to DOH in order to increase rebate collection.

In January 2016, the Comptroller released an additional audit conducted specifically "determine whether (DOH) is maximizing revenues from Medicaid drug rebates." In the Drug Rebate Program alone, the Comptroller found that the State failed to collect nearly $95.1 million during a 4 year period. Of these uncollected funds, the Comptroller determined $86.4 million was a result of failing to "review its internal policy decisions regarding rebate exclusions to reaffirm or reject their validity." The balance of the shortfall, the Comptroller determined, was a result of failing to "adequately oversee its rebate invoicing processes to ensure all claims that were eligible for rebate were accurately identified and invoiced to manufacturers."

Studies show that Medicaid programs in over 45 states boost their Medicaid drug rebate collections by disclosing prescription-level data to third party vendors with expertise in providing standardized databases to validate Medicaid rebate invoices and expedite the resolution of disputed claims, in an unbiased, objective manner. According to the Centers for Medicare and Medicaid Services (CMS), "data vendors can be invaluable for the purpose of validation drug rebate data, identifying potential errors and achieving dispute resolution between States and pharmaceutical manufacturers." The California Department of Health Services noted that since providing claims detail data to a third party data vendor, "the percentage paid of the invoiced amount has increased" and "companies pay a larger amount within the initial payment timeframe."

This bill requires DOH to share information and work cooperatively with one or more third party data vendors in a demonstration program to determine the extent to which such collaboration will maximize Medicaid drug rebate revenues to the State. The goals of this demonstration program are consistent with the Comptroller's findings and recommendations.

Legislative history

S.5043-A of 2011 - Passed the Senate.

Fiscal implications

No cost to the State. Potential increase in revenues based upon resolution of disputed rebate amounts.

Effective date

Immediately.