Audit of the Medicaid Drug Rebate Program in Montana, A-07-03-04020

Room 284A Kansas City, Missouri 64106 Report Number A-07-03-04020 Ms. Gail Gray, Director Montana Department of Public Health and Human Services 11 1 Sanders St. Helena, MT 59604 Dear Ms. Gray: Enclosed are two copies of the U.S. Department of Health and Human Services (HHS), Office of Inspector General, Office of Audit Service's (OAS) final report entitled "Audit of the Medicaid Drug Rebate Program in Montana. " The audit objective was to evaluate whether the Montana Department of Public Health and Human Services (Department) had established adequate accountability and internal controls over the Medicaid drug rebate program. We determined that although the Department had adequate controls over the collections of drug rebates from the manufacturers, they did not have adequate controls to account for receivables as required by Federal regulations. These issues occurred because the Department did not develop or follow adequate policies and procedures with regard to the Medicaid drug rebate program and also because they did not devote sufficient resources to complete a system conversion prior to implementation. Specifically, Federal regulations require effective control over and accountability for all funds, property and other assets. As a result, drug rebate receivables were perpetually understated and it is likely that the Department did not receive all rebate payments due from manufacturers. We recommend that the Department develop and follow ...