OIG-HHS review of Medicaid drug claims for FDA approval demonstrates disconnect between CMS, FDA data

by Ben Vernia | November 29th, 2010

In a report released on November 24, the Office of Inspector General of HHS, responding to a Congressional request, compared National Drug Code (NDC) identifiers for Medicaid prescription drug claims in 2008 against FDA data sources showing drug approval by NDC code. The OIG-HHS began by noting the significance of drug approval for Medicaid claims: in most cases, only approved drugs are eligible for reimbursement under that Federal/State program.

Although the review determined that either an NDC or an approval could not be found for over 1/3 of the NDCs for which Medicaid claims were submitted, a closer examination of a small, high-dollar sample of these drugs indicated that approvals had, in fact, been given for many of them.

In the words of the report, “the NDC Directory cannot reliably be used to verify the approval and listing status of drugs paid for under Medicaid.” The OIG-HHS recommended two primary improvements:

  • Conduct frequent reviews of its NDC Directory to ensure its completeness and accuracy.
  • Work with the Centers for Medicare & Medicaid Services (CMS) and Congress to seek a legislative or regulatory change that compels manufacturers to list all approved products with FDA before the products become eligible for Medicaid payment. By making payment under Medicaid contingent upon listing, manufacturers would have an increased incentive to ensure that FDA had the most complete and timely information on the products in the NDC Directory.

In a letter, the FDA largely concurred with these recommendations, and noted that it had already undertaken to improve the quality of its data.

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