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A company that was supposed to collect rebates from drug manufacturers on behalf of the New York State Health Insurance Plan (NYSHIP) failed to turn over nearly $1.5 million in rebates to the state over a four-year period, according to an audit released today by State Comptroller Thomas P. DiNapoli.

"Contractor Express Scripts collected rebates but failed to turn over a significant amount of them to the state. This money is intended to help hold down costs of the program and contractors are expected to make every effort to collect and turn over all rebates," DiNapoli said. "The Department of Civil Service and United HealthCare need to make sure this money is fully collected and remitted to the state."

The New York State Health Insurance Program, administered by the Department of Civil Service, provides health insurance coverage to approximately 1.2 million active and retired state, participating local government and school district employees and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, serving about 1.1 million of these members.

Civil Service contracted with United HealthCare to administer the Empire Plan's prescription drug program. Under the contract, United was responsible for agreements with drug manufacturers for rebates, discounts, and other considerations. United was required to pass 100 percent of the resulting revenues back to the prescription drug program. For the audit period Jan. 1, 2010 through Dec. 31, 2013, United remitted $862.9 million from such agreements with drug manufacturers.

United subcontracted key functions of the prescription drug program, including the negotiation, collection, and allocation of rebates offered by drug manufacturers. Express Scripts Holding Company took over those duties in 2012.

DiNapoli's auditors found that on a quarterly basis, Express Scripts invoiced drug manufacturers for rebates and, in accordance with its subcontract with United, made quarterly payments to United based on the rebates it estimated it would receive from the manufacturers. In turn, United transferred those rebates to Civil Service.

Express Scripts then performed reconciliations 450 days after the end of each quarter to compare the actual rebates received from drug manufacturers to the estimated payments made to United. Express Scripts officials said they retained all rebates collected from drug manufacturers after the 450-day reconciliation. That practice, however, is contrary to both Civil Service's contract with United and the subcontract between United and Express Scripts, which required all rebates to be passed through to the NYSHIP drug program.

DiNapoli's auditors analyzed data provided by Express Scripts for the audit period and identified $1,498,719 in NYSHIP rebates that Express Scripts did not remit. The audit recommended United work to get that money for the state.

Officials from United agreed with the audit's findings and stated they will remit the rebates identified by the audit to Civil Service.

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