OIG Approves Affordable Care Act Changes to Arkansas Medicaid Drug Rebate Program

The HHS Office of the Inspector General (OIG) reviewed the changes made pursuant to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) to Arkansas’ Medicaid Drug Rebate Program and approved the methods in which Arkansas plans to report its Medicaid rebates to the federal government. In light of the implementation of the PPACA, portions of Medicaid drug rebates due to the federal government have increased. In turn, states must implement reporting systems to ensure these increased amounts are properly calculated. The recent changes to Arkansas’ Medicaid system, both in respect to the drug rebate modifications and to Medicaid expansion as a whole under the PPACA, follow Arkansas’ collaboration with non-governmental entities to review and implement changes to that system. Similarly, there is evidence of other states following Arkansas’ lead with respect to outside consulting firms and fiscal agents to encourage and enact change in each state’s respective Medicaid programs.

Medicaid Drug Rebate and Recent PPACA Changes

Since 1991, the Medicaid program has mandated that in order for their products to be covered under the program, drug manufacturers must have contracts with CMS regarding rebates and must provide rebates to the states on a quarterly basis. Previously, states kept a portion of those rebates and returned a portion to the federal government. The amount reported and collected by the federal government was based on the federal medical assistance percentage (FMAP). The PPACA increased the amount of rebates and now the federal government will retain 100 percent of those increases attributable to the PPACA. The amount of the rebate increase for each drug under the PPACA is based on whether the drug is a brand name or a generic.

Arkansas Program

Arkansas and Hewlett-Packard Enterprises Systems, LLC (HP) have entered into a contract in which HP will calculate the amount of the rebates due to Arkansas and will bill the manufacturers for those rebates. The manufacturers will then make the rebate payments to the Arkansas state Medicaid program. HP will subsequently review the rebate invoices and use the unit rebate offset amount, or the amount set by CMS to relate the increased rebates amount for each drug under the PPACA, to determine the amount payable to federal government. According to a recent press release, HP announced that it has also recently contracted with the state of Wisconsin to perform similar services regarding Wisconsin’s Medicaid drug rebate program.

Arkansas and Other Recent Medicaid News

 The OIG’s approval of Arkansas’ Medicaid drug rebate program changes in light of the PPACA is accompanied by other recent developments with regard to Medicaid in Arkansas. The Obama Administration recently approved of another Arkansas Medicaid program with respect to changes brought on by the enactment of the PPACA. Specifically, Arkansas has been given the Obama Administration’s consent to enact a hybrid Medicaid expansion which would use tax revenue to buy private insurance for new Medicaid enrollees.  The new hybrid system in Arkansas was created following a contract with another non-government entity, the Alexander Group. Earlier this year the Alexander Group was hired to review Arkansas’ Medicaid system and subsequently proposed several cost-cutting measures. It is now being reported that the Alexander Group has also contracted with Maine to review its Medicaid program and, in particular, to review the costs of expansion of the program under the PPACA.