FINDINGS

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Of the 17 States that collected physician-administered drugs in 2001, 3 States collected rebates on all such drugs, and 14 collected rebates on single-source drugs only.

Three States that use national drug codes for billing were able to collect rebates on all physician-administered drugs.

Only three States use national drug codes to bill physician- administered drugs (Hawaii, Missouri, and Pennsylvania). They were able to collect rebates for physician-administered drugs regardless of whether the drugs were single-source or multiple- source. Two of the three States sent us their data on total rebates collected in 2001. These two States collected $3 million in rebates or 30 percent of their total payments ($10 million) for physician-administered drugs.

Fourteen States were only able to collect rebates on single-source, physician-administered drugs.

Fourteen States that use procedure codes instead of national drug codes to bill physician-administered drugs were able to collect rebates for single-source drugs only. The four States that provided data collected $14 million in rebates on these drugs.

In order to collect rebates for single-source drugs, these 14 States developed a crosswalk to link procedure codes to national drug codes; developed conversion factors for codes where the description of procedure code units differed from rebate units; performed regularly scheduled system maintenance (e.g., to verify that the drug code is still active); identified claims with procedure codes that were, or could be, crosswalked; and changed the rebate invoicing procedure to merge physician services and pharmacy claims.

Medicaid could have added an estimated $37 million to its rebate savings in 2001 if all States had collected rebates on single-source and 40 multiple-source, physician-administered drugs. Individual State payments and potential savings are in Tables 1 and 3 of Appendix A.

Medicaid would have obtained the majority of these rebate savings from single-source drugs. States that did not collect rebates for single-source, physician-administered drugs had payments totaling $99 million for this subset of drugs. These States could have reduced 2001 expenditures on these drugs by an estimated 30 percent or $30 million if rebates had been collected.

Medicaid could have obtained further savings in rebates for 40 multiple-source drugs.

The States that did not collect rebates for 40 multiple-source, physician-administered drugs paid $70 million for these drugs in 2001. These States could have lowered payments by an estimated $7 million or 10 percent by collecting the rebates. had not collected rebates on any physician-administered drugs began collecting rebates for some of these drugs. Six of these seven States implemented changes (e.g., developed a crosswalk) to collect rebates for single-source, physician-administered drugs. The remaining State reported that it targets the eight highest paid providers who bill physician-administered drugs and asks them to provide the national drug code from the product dispensed for the paid claim. Once the State has the drug code, rebate invoices can be sent to manufacturers.

The 2001 potential savings for these 7 States was $14 million on all single-source and 40 multiple-source, physician-administered drugs. This $14 million represents 38 percent of the total $37 million in potential savings for 2001.

As of March 2003, 24 States still did not collect rebates on any physician-administered drugs.

The 24 States that did not collect rebates on physician-administered drugs as of March 2003, reported spending $125 million for these drugs in 2001. Nineteen of these 24 States said they plan to collect rebates for physician-administered drugs. However, 13 of 19 have no specific plans to change their systems. Some of these 13 States said that they were aware of changes that are needed, and others said they did not know what changes are needed. Four of the 19 States indicated they have begun the process of making changes to their systems such as ordering a change to their Medicaid Management Information System, developing a crosswalk, building a new claims management system to accommodate national drug codes on professional service claims, and changing policies and billing instructions to require national drug codes. The remaining 2 of 19 States responded that they have created crosswalks for single-source drugs.

Five of 24 States that currently do not collect rebates on physician-administered drugs said they do not have plans to collect rebates for these drugs. These 5 States had $25 million in expenditures for physician-administered drugs.

Of the States currently collecting rebates on physician-administered drugs, four were able to provide system implementation costs for collecting rebates for these drugs. Costs ranged from a high of $642,000 to a low of $56,100.

  • The State that reported the highest implementation cost estimate ($642,000) is a State that now collects rebates for all physician-administered drugs. This State implemented a policy change in 1992 that required physician-administered drugs be billed on pharmacy claims forms. Then, in 1994, they spent an estimated $642,000 to integrate the pharmacy rebate system into their Medicaid Management Information System. In 2001, they collected $3 million in rebates for physician-administered drugs.
  • A State that began collecting rebates in 2001 for single-source, physician-administered drugs spent an estimated $220,000. They made modifications to their Medicaid Management Information System, including creating a crosswalk and tables to store physician-administered drug claims, and merging physician services and pharmacy claims for rebate invoicing. In 2001, this State requested $2 million in rebates from drug manufacturers for single-source, physician-administered drugs.
  • Another State estimated spending $110,000 for personnel needed to make system changes to collect rebates for single-source, physician-administered drugs. This State began collecting rebates for these drugs after 2001, but in 2001 the State invoiced manufacturers $1 million for rebates on these drugs.
  • The State that had the lowest implementation costs ($56,100) collected $3 million for single-source, physician-administered drugs in 2001. This State began collecting the rebates in 1998. This State’s implementation costs were for a system engineer to create a link between procedure codes and national drug codes, add programming that automatically relates procedure-code billing to drug-code billing, merge physician and pharmacy claims for invoicing, and test the system.

Three additional States said they plan to collect rebates for single-source, physician-administered drugs. These States estimated the costs for system changes would range from $10,008 to $150,000. In addition to these one-time expenditures, 1 State planning to make changes said it would cost approximately $1,500 per year to maintain the new system

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