Executive Summary

HCFA MAY FINE MANUFACTURERS FOR INCOMPLETE MEDICAID REBATE DATA, Health Care Financing Administration Office of Medicaid Policy Director William Hickman said Oct. 8. Addressing a National Pharmaceutical Alliance meeting in Washington, D.C., Hickman said HCFA recognized that the Medicaid drug rebate law's implemention would be "a difficult undertaking for everybody, so we've been somewhat lenient to this point in terms of exercising the authority we have in the law in fines for incomplete or nonsubmitted data -- but we have that authority and we're going to begin to have to use that in order to resolve these problems." Hickman said HCFA has heard complaints regarding both manufacturers' slowness in submitting the data and states' slowness in opening their formularies to drugs made by companies that have signed rebate contracts. "Both of these failures are unacceptable and we're going to be taking steps to address these problems," he warned. Hickman also said HCFA will establish a deadline by which states must submit utilization reports to manufacturers or else forfeit their rebate payments. The Medicaid rebate law directs that states submit reports within 60 days after the end of a calendar quarter, but a number of states have had trouble gearing up for that turnaround ("The Pink Sheet" Sept. 2, p. 3). However, Hickman noted the law contains no penalties for states that do not submit their utilization reports in a timely manner. Hickman advised that "we do plan to set a timeframe on when a state ultimately has to get [the report] in, even though they're late. If they don't get it in by the second timeframe, then [the manufacturer is] off the hook [for paying the rebate]. So what that will do is at least stop you from carrying accounts payable . . . forever and it will give some certainty to the situation." The deadline for state reports probably will be set in an interim final rule on the rebate program that HCFA aims to publish by the end of 1991. HCFA is not planning any changes to the Medicaid rebate contract in the next few months but "we may very well start making changes and start an April 1 new rebate agreement," Hickman said. The contract, signed by HCFA and a manufacturer, is self- renewing unless either party cancels it or it is revised. Hickman said the agency is holding off on any possible changes until at least April 1 for three reasons: to understand better the problems occuring during implementation, to see whether Congress enacts any statutory changes and to avoid a rush of activity during the Christmas/New Year's holiday period. Another policy issue HCFA is addressing is providing "further guidance on the dispute resolution process," including the amount of authority states have in settling disagreements with manufacturers over rebate payments. "One of the things we're concerned about is when you get down to the point where the dispute is quibbling over small dollars . . . [states] are unsure of their permission to settle it at that point. They have a natural concern that federal auditors, the Inspector General and so on, might come in and say 'you let money go that you're entitled to,"' Hickman said. States could be given some latitude, for example, to reach a settlement with a manufacturer when the administrative costs of recovering a disputed rebate payment is greater than the payment itself, he suggested.