Rebates for physician-administered drugs help States reduce prescription drug expenditures, which are rising at a time when State budgets are severely stressed. Federal and State Medicaid expenditures on physician-administered drugs could have been reduced by an estimated $37 million in 2001 if all States collected rebates on those drugs.

Based on cost estimates provided to us from States that have implemented changes in order to collect rebates for physician-administered drugs, the savings from rebates in 1 year can exceed the one-time costs of implementing system changes.

We recommend that CMS continue to encourage all States to collect rebates on physician-administered drugs, especially single-source drugs. As part of this effort, CMS should encourage cooperation and the sharing of information between States that collect rebates for these drugs and States that do not, in order to facilitate rebate collection. It would be valuable for States that do not collect rebates for physician-administered drugs to know the details of implementing system changes, such as the what, where, when, and why of resources needed, and how the process unfolded for States that have been down this road. CMS could also issue a letter to State Medicaid Directors informing them about the availability and usefulness of the Medicare crosswalk. States could use this crosswalk, which is on the Internet, to reduce the administrative costs of creating and/or updating their own crosswalk.


CMS concurred with our recommendation and is currently facilitating information sharing. The agency is passing on information to States seeking help to collect rebates on physician-administered drugs and providing contact names in States that have experience in this area. In addition, CMS has asked its Pharmacy Technical Advisory Group to serve as a resource to share this information with States in their consortia.

CMS disagreed with our $37 million estimate of potential savings. As we reported, States provided us their payment and rebate information for physician-administered drugs for calendar year 2001 and told us whether they collected rebates on physician-administered drugs that year. We used the information provided by the States to calculate additional potential savings for each State in 2001. We acknowledge that the savings in future years will depend on rebate amounts and utilization and would likely be different from 2001.

CMS also commented that our report did not break out the States that did not collect rebates in 2001 and that our report did not estimate their potential savings. We wish to point out that in Table 1 in Appendix A, we showed which States did not collect rebates in 2001 and which States told us they began collecting rebates after 2001. We also showed the 2001 potential savings for each State in Table 3 of Appendix A. We have added a sentence to page 10, citing the 2001 potential savings for seven States that began collecting rebates after 2001.

CMS noted that of the 24 States not collecting rebates as of March 2003, 13 States had specific plans to collect rebates for these drugs and 6 States, while not having plans in place, indicated they will collect these rebates in the future. Our study, however, found the opposite for this subset of States. Thirteen States did not have specific plans, and six States did have specific plans (pages 10-11). In Appendix A, Table 1, we have added footnotes 12, 13, and 14 to identify the States that said they do not have specific plans, do have specific plans, and do not plan to collect rebates for these drugs. The full text of CMS comments is in Appendix B.

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