DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Arkansas Department of Human
Services Docket No. 86-244
Audit Control No. 06-60233
Decision No. 847
DATE: March 12, 1987
DECISION
The Arkansas Department of Human Services (State) appealed
the
disallowance by the Health Care Financing Administration (HCFA)
of
$238,499 in federal financial participation (FFP) claimed under
Title
XIX (Medicaid) of the Social Security Act (Act) for costs of
certain
drugs. The disallowance was based on an audit report which
found that,
during the period October 1, 1982 through March 31, 1985,
payments for
less-than-effective drugs were included in the State's claims
for
prescription drug expenditures. The auditors identified 38,081
paid
prescriptions amounting to $326,488 ($238,499 FFP) in Medicaid
payments
made by the State to pharmacies for drugs that were determined by
the
Food and Drug Administration (FDA) to be less-than-effective,
including
drug products considered identical, related, or similar to
the
ineffective drugs. The auditors concluded that unallowable
payments
occurred because the State did not have adequate procedures to
ensure
discontinuing payments after drugs, found to be
less-than-effective by
the FDA, were listed in the Federal Register.
In its Notice of Appeal the State alleged that HCFA had failed to
properly
provide the State, through regulation or memorandum, with a
timely list of
less-than-effective drugs.
The Board previously issued two decisions involving the subject
of
less-than-effective drugs. In Illinois Department of Public
Aid,
Decision No. 667, July 2, 1985, Illinois' claims for FFP for three
drugs
were rejected by HCFA. Illinois did not dispute FDA's finding
that the
drugs were ineffective; rather, Illinois argued that HCFA's
notification
process did not give states fair notice and enough time to stop
use of
the drugs. Illinois contended that HCFA was required to publish
its own
rule that it was terminating payment for a drug rather than relying
on
FDA's publication of a notice--generally referred to as a "NOOH"--in
the
Federal Register. HCFA responded that under the regulations FFP had
to
be terminated as of the date of the NOOH plus the applicable
grace
period.
Based on examination of sections 1862(c) and 1903(i)(5) of the Act and
the
implementing regulations, the Board held that it was clear that
publication
of the NOOH by itself triggered a drug's ineligibility for
reimbursement
under the Medicaid program. As for the period of time a
state had to
stop reimbursement for costs associated with drugs listed
in the NOOH, the
Board found that under HCFA's own regulatory scheme,
there was an initial,
one-time 90-day grace period following the
effective date of the first NOOH,
and that drugs appearing in subsequent
NOOHs would have a grace period of 30
days.
In Pennsylvania Department of Public Welfare, Decision No. 836,
February
17, 1987, the issue was whether the Board's reasoning in Decision
No.
667 could be extended to drugs which, while not identified
as
less-than-effective per se in a NOOH, were "identical, related,
or
similar" to ineffective drugs listed on NOOHs. The Board found
that
Pennsylvania had the information and ability to promptly determine
that
the drugs in question were "identical, related, or similar"
to
identified less-than- effective drugs and that HCFA therefore
correctly
denied FFP for their continued use.
The Board sent the State copies of these two decisions. In
response,
the State, rather than submitting evidence and argument in this
case,
requested that the Board issue a summary decision.
We therefore sustain the disallowance of $238,499 based on
Decision
Nos. 667 and 836, which we incorporate by reference here.
_______________________________ Judith
A.
Ballard
_______________________________
Donald
Garrett
_______________________________ Norval
D.
(John) Settle Presiding Board Member