Bad Debt

Drug Rebate Problems Plague Medi-Cal
April 2004

With a 13-year backlog of Medicaid drug rebate claims, California has failed to collect more than $1.3 billion in rebates owed to it. That is the finding of an audit of Medi-Cal by the U.S. Department of Health and Human Services.

Medi-Cal pegs the figure closer to $818 million. Recent claims comprise most of that tally, says Ken August, a spokesman for the state Department of Health Services. Medi-Cal has already recovered $500 million, August says, and $300 million of the disputed rebates stretch back to 1991. While 11 staffers have been hired to go after the back bills, the agency expects to recover only about $30 million. The remainder was never actually owed, August says, but was the result of a faulty computer system. The system, which was used until 2002, led to a multitude of billing problems. In the early 1990s, for instance, almost 70 percent of drug rebate claims were disputed. Improved technology has reduced that figure to 5 percent. Moreover, Medi-Cal will collect about $1.5 billion in rebates that drug companies owe the agency this year.

Legislators, with an eye on the state's huge deficits, are concerned that systemic problems in the drug rebate program remain. "We're launching an investigation," says state Assembly Majority Leader Dario Frommer, who submitted a formal set of questions about the rebate backlog to Kim Belshe, the state Secretary of Health and Human Services. "We need to get every dollar we're entitled to."