Objective

To assess the extent of implementation of the two recommendations included in our initial audit report, CVS Health: Accuracy of Empire Plan Medicare Rx Drug Rebate Revenue Remitted to the Department of Civil Service (Report 2022-S-1).

About the Program

The New York State Health Insurance Program (NYSHIP), administered by the Department of Civil Service (Civil Service), is one of the nation’s largest public sector health insurance programs. NYSHIP covers about 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 over 1 million members. Individuals who are dual enrolled in the Empire Plan and Medicare have their prescription drug coverage under Empire Plan Medicare Rx, a Medicare Part D Prescription Drug Plan with expanded coverage designed especially for NYSHIP.

Since 2014, Civil Service has contracted with CVS Caremark to administer the prescription drug coverage program. From January 2014 through December 2019, the cost of the prescription drug program averaged $2.5 billion per year. In accordance with the contracts, CVS Caremark was required to negotiate agreements with drug manufacturers for rebates, discounts, and other considerations (herein collectively referred to as “rebates”) and remit the rebate revenue to Civil Service. From January 2014 through December 2019, Civil Service received about $1.2 billion in Empire Plan Medicare Rx rebates.

The objective of our initial audit, issued on June 21, 2023, was to determine whether CVS Caremark appropriately invoiced drug manufacturers and remitted corresponding rebate revenue to Civil Service for prescription drugs provided under the Empire Plan Medicare Rx drug benefit. The audit covered the period January 1, 2014 through December 31, 2019. The initial audit reviewed the rebate revenue generated by Empire Plan Medicare Rx and found that CVS Caremark did not always invoice drug manufacturers for rebates, collect rebates from the manufacturers, or remit all rebate revenue to Civil Service. As a result, we identified $10,723,916 in rebates that was due to Civil Service from CVS Caremark.

Key Findings

CVS Caremark made some progress in addressing the issues we identified in the initial audit. CVS Caremark recovered and remitted $419,233 in rebates to Civil Service; however, CVS Caremark was unable to provide evidence indicating why the majority of rebates identified in the initial audit were not remitted to Civil Service. CVS Caremark also failed to provide any support showing that corrective actions were taken to ensure the timely collection and remittance of all rebate revenue. Of the initial report’s two audit recommendations, one was partially implemented and one was not implemented.

Key Recommendation

CVS Caremark officials are requested, but not required, to provide information about any actions planned to address the unresolved issues discussed in this follow-up within 30 days of the report’s issuance.