Auditor Urges State To Resolve Disputes Over Medi-Cal Drug Rebates

Last week, state Auditor Elaine Howle released an updated report urging Gov. Jerry Brown (D) to ensure that the Department of Health Care Services works to resolve $355 million in disputed drug rebates that might be owed to the state, California Watch reports.

Background on the Disputes

The disputes center on rebates that drug companies often pay to states that buy medications for beneficiaries of Medicaid, called Medi-Cal in California.

Marjorie Powell -- senior counsel with the drug industry group Pharmaceutical Research and Manufacturers of America -- said problems can arise when states send drug companies bills that appear to overstate the supply of drugs sent to wholesalers. She added that clerical errors also can contribute to disputes over rebate amounts.

Key Findings

Howle's report found that since 2002, California has spent more than $1 billion annually on prescriptions for Medi-Cal beneficiaries. In 2005, Medi-Cal prescription spending reached as much as $2.2 billion.

Every year, rebates representing about 2% of sales -- or between $23 million and $43 million in recent years -- have remained in dispute, the report found.

Response to the Findings

In response to the report, Medi-Cal officials said that they recently sought to resolve $26 million in disputed drug rebates from 1991 to 1996, but have yet to hear back from pharmaceutical firms.

Last spring, Pilar Williams, Medi-Cal's pharmacy benefits chief, said rebate disputes are complicated and require substantial effort to resolve. She noted that her agency has 13 staff members to resolve disputes with 400 companies.

According to California Watch, Medi-Cal officials now plan to track the amount of money that is collected or written off when resolving rebate disputes (Jewett, California Watch, 7/6).