OIG: Medicaid Paid $6.2B for Unapproved Drugs

More than a third of the prescription drugs paid for by Medicaid in 2008 were not on a list of approved drugs in National Drug Code Directory and may have accounted for $6.2 billion of the $24 billion that Medicaid spent on prescription drugs that year, according to an audit by the Department of Health and Human Services' Office of Inspector General.

In all, Medicaid paid for prescription drugs associated with 27,143 NDC listings, for which only 62%— 16,945—had an approved application number listed with the NDC Directory, the OIG has found.

The Food and Drug Administration maintains the NDC Directory, which contains the name, a numeric drug identifier, and the approved application number for each listed drug. Drugs must be FDA approved to qualify for Medicaid payments. In 2008, Congress raised concerns that Medicaid pays for drugs that do not meet this criterion and lawmakers asked OIG examine the FDA approval status of drugs paid for by Medicaid. Previous OIG reports found problems with the accuracy and completeness of FDA's NDC Directory, OIG reports.

Federal auditors examined 2008 Medicaid utilization data for prescription drugs, approval and listing data from FDA, and a targeted manual review to determine the FDA approval status of drugs paid for by Medicaid. The OIG audit found that there was no approved application number in FDA's NDC Directory for thousands of drugs paid for by Medicaid.

"Twelve percent of NDCs under review were listed in the NDC Directory but did not have an approved application number, and an additional 26% were not listed in the NDC Directory at all. As a result, Medicaid could potentially pay for drugs that are not approved by FDA. Without accurate approval and listing information, it is impossible to determine whether these drugs were paid for appropriately," OIG reported.

OIG recommended that the FDA conduct frequent reviews of the NDC Directory to ensure its accuracy and thoroughness, and work with the Centers for Medicare & Medicaid Services and Congress to create legislative or regulatory changes that force drug makers to list all approved products with FDA before they're eligible for Medicaid payments.

In its formal response to the audit, FDA said it generally agreed with the OIG's recommendations, and had already begun implementing several initiatives to evaluate and enhance the quality of drug listing data.

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