Beware of the Many Operational Challenges of Medicaid Rebate Processing

For most pharmaceutical manufacturers, participation in the U.S. Federal Medicaid Drug Rebate Program (MDRP) is an important and necessary component of their commercialization strategy.

Participation means acceptance into the nation’s complex pharmaceutical distribution and dispensing network and access to a significant proportion of prescription users in the U.S. Additionally, many retailers are unwilling or unable to carry a product that is not Center for Medicare and Medicaid Services (CMS) eligible, as inventory space is at a premium and they cannot carry a product that half of their customer base is unable to purchase.

In 2021, more than 80 million Americans were enrolled in Medicaid, and enrollment is expected to grow exponentially in upcoming decades. As enrollment rises across 300+ state programs, manufacturers participating in the MDRP need a sound strategy to handle increased rebate volume. They also should possess intimate knowledge of validation and processing needs by state to avoid revenue leakage or compliance risks with CMS.

There are many operational challenges that present risks for revenue leakage and compliance for manufacturers:


  • CMS requires all Medicaid invoices be reconciled and rebate payments postmarked within 38 calendar days from the postmark date of the invoice. If a manufacturer fails to comply with this timeframe, interest will begin to accrue for outstanding payments. More importantly, if neglecting payments becomes habitual for a manufacturer, it risks state programs reporting it as an uncooperative labeler and jeopardizes its CMS agreement and enrollment in the MDRP.
  • USPS delivery delays due to ongoing COVID-19 impacts are an added risk in processing rebates within the 38-day window. Frequently, invoices can arrive a few weeks after their postmark date. Manufacturers need to have awareness of these delays and factor them into the mandatory processing timeline as appropriate.


  • Each state has unique portals and administrative processes to access Medicaid rebate invoices. While most states have web portals with unique login credentials for digital downloads, select states continue to print and mail hard copy invoices. Managing 50+ unique logins, downloading invoices and text files and reconciling varied formats for invoice payment can prove to be labor-intensive for manufacturers – especially within the 38-day processing window.
  • In many cases, rebate processing and program payment groupings vary by state – some rebate programs can be paid together while others require separate payment within the same state. Having a clear understanding of which programs support grouped vs. separate payments at the state level is important to efficiently resolving rebate liabilities and avoiding late fees.
  • State processing offices have not been immune to pandemic-related labor and staffing shortages. These shortages can contribute to longer processing timelines, delays in applying payments and longer lead times in resolving issues / disputes within select states. Maintaining strong relationships with state or contracted Pharmaceutical Benefit Manager (PBM) processing contacts is critically important in adhering to state-specific processing guidelines and efficiently resolving challenges and discrepancies.


  • Invoices are often auto-generated based on changes in URA and/or utilization by the state or PBM rather than rebate liabilities. They can cause duplication of the same invalid invoices quarter after quarter unless resolved through manual intervention with the appropriate entities.
  • With staffing turnover and remote work becoming a standard practice, delays in processing payments or mishandling by states or PBMs can result in a duplicate invoice being generated. It is important for manufacturers to keep thorough records and backup documentation for invoice processing and payments to avoid duplicate payments and/or late fees.
  • When payments are processed, manufacturers may see cases where backup documentation is not attached to the payment submission by state programs. In these instances, programs will reach out to manufacturers claiming they have not received payment and those manufacturers must resubmit backup documentation (often multiple times) as well as proof that the payment was processed in the form of canceled checks. Again, maintaining thorough records and backup documentation is critical to resolving these discrepancies.
  • Despite invoices previously being paid in full, rounding errors often contribute to manufacturers repeatedly receiving invoices with penny balances. This can be the result of state or issuing entities rounding URAs to six or more decimal places (instead of four as directed by CMS). To rectify inaccuracies from rounding errors, it’s important for manufacturers to maintain close communication with state and PBM contacts to resolve errors and avoid repeat invoicing.
  • Manufacturers may receive zero-dollar invoices from select entities that still require interest payments for these programs. In these instances, it’s the manufacturers’ responsibility to calculate the interest owed and process payment. Accurate and organized payment history is essential here, as the manufacturer must determine if the interest owed is valid, and if so, must know the cumbersome procedure for calculating interest owed based upon prime interest rates applied daily as required by CMS.
  • Many manufacturers follow a traditional ‘pay and chase’ methodology, by paying as invoiced and auditing retrospectively in the future cycles. Within this practice, we frequently find manufacturers have double or even triple paid their rebates when we review data from onboarding clients. Thorough auditing of rebate invoices prior to payment is time-consuming, but a worthwhile effort to reduce revenue leakage. We have found over 1/3 of the invoices received in any given quarter do not require payment.


If you’re considering a partner to reduce revenue leakage and more efficiently manage your growing Medicaid rebate processing needs, Prescription Analytics has the expertise and best-in-class systems and processes to support your success.

Prescription Analytics’ dedicated team of professionals are experts in Medicaid operations. They will work with PBMs and states on your behalf to validate and process rebate payments. Our team’s in-depth knowledge, high attention to detail, disciplined approach and strong relationships with processing contacts means our clients stay compliant without overpaying their rebates.

Prescription Analytics processes include meticulously reconciling all invoices and identifying errors such as duplicate invoices, rounding mistakes, zero payment owed, and inaccurate totals claimed prior to payment. We provide detailed backup documentation to state programs and process only valid ROSI/PQAS payments. As a result, we commonly generate rebate credits for new clients via restatements following a thorough audit of their Medicaid payment history and government pricing computations.

“Prescription Analytics helped us recoup several million dollars in overpaid rebates from six prior quarters. They sweated the details, resulting in a substantially better outcome for us.”

Biplab Mazumdar, Controller, Cipla USA

For more information regarding how we can serve your Medicaid rebate validation and processing needs, please contact Mark Patton, CEO, at

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