State’s pharmacy programs overpaid some providers, missed rebates from others

Photo by Angela Breck.

The Maryland Department of Health’s pharmacy services administrations had insufficient financial record-keeping, late rebate collections and a lack of oversight for millions in state funds under five separate medication assistance programs, a recent audit says.

That included $12.4 million in drug rebates that the state had not collected in a timely manner – $1.5 million of which was a year past due – and $397,000 in overpayments, according to the Office of Legislative Audits report publicly released Aug. 14.

The recent report is the latest in a string of audits that the department has had to respond to in 2024, adding on to a pile of reports showing that the state health department had “pervasive lack of documentation” in recent years. Those shortcomings come with the potential for millions in potential losses – including one from last fall that identified $1.4 billion in COVID-19 relief funds the department was not able to fully account for.

“I hate to say it, but it’s more of the same, frankly from what we were left with from the Hogan administration,” said Del. Jared Solomon (D-Montgomery), House co-chair of the Joint Audit and Evaluation Committee.

“It’s the same pattern. It is smaller scale numbers – instead of the billion we’re talking about you know a couple of million here or there – but it is the same problems,” Solomon  said.

While the latest audit covered a period from July 1, 2019, to Dec. 31, 2022, it comes as state officials are sounding the alarm about looming budget problems. And in challenging budget years, every dollar matters, said Sen. Clarence Lam (D-Anne Arundel and Howard), the Senate co-chair of the Joint Audit and Evaluation Committee.

“I think it’s concerning in the broader picture of where our state is with our budget. I think we all recognize where we’re going in the next few years – it’s going to be a challenging budget environment – and we need to be very careful with where our dollars are getting spent,” Lam said.

The department acknowledges that the findings are “factually accurate” and is working with the Office of Legislative Affairs to correct the financial documentation.

“Under the Moore-Miller administration, the Maryland Department of Health is committed to working to correct issues found under the previous administration,” said Chase Cook, communications director for the department, in an emailed statement. “As noted in the audit responses, MDH has taken a number of actions to address these findings and strengthen its delivery and program integrity of pharmacy services.”

Just this past week, Gov. Wes Moore (D) warned of another tight fiscal year with difficult decisions on the upcoming budget required in the legislative session that starts in January. He has said there is a high bar for raising taxes but said that “everything is on the table,” without elaborating.

The most recent audit reviews five programs under the Medical Care Programs Administration and the Prevention and Health Promotion Administration that help low-income Marylanders afford treatment and prescriptions for HIV/AIDS, kidney disease, breast cancer and other conditions.

One of those programs is the Maryland AIDS Drug Assistance Program (MADAP), which the audit said did not have a documented process to ensure that it was correctly collecting rebates it was owed by drug manufacturers.

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“MDH could not readily determine the total amount owed by each drug manufacturer and the age of the receivables,” the audit said.

State auditors found that as of March 22, 2023, outstanding rebates for MADAP totaled $12.4 million, including at least $1.5 million that were a year old. It’s not the first time the issue of tardy rebate collection has come up: A 2020 audit found that MADAP failed to collect $20.6 million in rebates in a timely manner, and that about $1.6 million of those rebates were no longer collectable.

“These are not outstanding open accounts.” Lam explained. “There’s a certain period by which you can get reimbursed for these rebates, after which point, your window to request that expire.”

The audit also found that the Medical Care Programs Administration overpaid for prescriptions from June 2020 to  November 2022. In fiscal 2022, the MCPA processed 1,400 claims totaling around $46.8 million. Auditors sampled 15 claims and found that 11 of them were overpaid by a total of $397,000.

According to the report, the claims reviewed by the auditors found payments above the allowable drug cost ranging from $1,959 to $170,000. The audit said that the MCPA has since recovered $289,000 of the overpayments and is still working on recovering $108,000.

“MDH has implemented policies and procedures to ensure future manually processed pharmacy claims undergo independent documented review to ensure propriety,” according to the department’s response.

The audit also found problems with payments going to vendors that were not enrolled in a state pharmacy program, as is required by state regulations. But the auditors said their check “of 60 providers with significant paid claims” in fiscal 2022 found they were properly licensed.

Of those pharmacies that were properly enrolled, only fraction were audited. While the 52 pharmacies under MADAP were audited for fraud, waste and abuse, they account for just 2% of the pharmacies used by the other programs: Breast and Cervical Cancer Diagnosis and Treatment Program, Kidney Disease Program and the Maryland Medicaid Pharmacy Program.

Both of those issues had been raised in previous audits.

The health department said in the latest audit that it has updated its policies and procedures for auditing each program’s pharmacy claims, and that it is currently “recruiting for additional resources to conduct these reviews.”

Lam said the department has struggled to staff enough people to maintain proper accounting for these large programs.

“Unfortunately, many of us think the department, the finance and accounting department, really doesn’t have the capacity to handle the amount of oversight and accounting that’s required,” he said.

He said the department needs to figure out its staffing or shell out for an outside accounting firm to do the audits for them, or continue to lose track of funds.

“In each of these findings, it’s a couple hundred thousand. Or a couple million,” Lam said. “You add all that up, it could be additional people served by Medicaid. That could be programs that we are hoping to stand, but we don’t have the funding or we are concerned about the funding.

“These dollars add up. In a tough budget environment, the department needs to do a better job of accounting for every dollar and minimize all loss and I think they still have a lot of work to do,” he said.

Solomon agreed, saying that as “good stewards of taxpayer dollars,” it is lawmakers’ job is to be “make sure that every penny that the state is owed, either from private entities or from the federal government, is given to us and can be reinvested into programs in the state.”

“Regardless of the fiscal situation, but certainly at a time when we are … scrounging under couch cushions to make sure that we could fund and invest in the programs that are most important to the state,” he said.