The rebate amount is set by statute and includes two main components: a rebate based on a percentage of average manufacturer price (AMP) and an inflationary component to account for price increases. Under current law, manufacturers who want their drugs covered by Medicaid must enter a federal rebate agreement under which they rebate a specified portion of the Medicaid payment for the drug to the states, who in turn share the rebates with the federal government. Recent federal legislation has changed the structure of the Medicaid Drug Rebate Program (MDRP), which provides a significant offset to Medicaid drug spending, to lift current caps on rebate amounts. 469, T he Affordable and Safe Prescription Drug Importation Act, July 2017.ġ. 1319, American Rescue Plan Act of 2021,March 2021 CBO, Prescription Drug Pricing Reduction Act of 2019, March 2020 CBO, A Comparison of Brand-Name Drug Prices Among Selected Federal Programs, February 2021 KFF, Pricing and Payment for Medicaid Prescription Drugs, January 2020 MACPAC High-Cost Specialty Drugs: Review of Draft Chapter and Recommendations, April 2021 CBO, S. SOURCE: CBO, Estimated Budgetary Effects of H.R. If Medicaid is able to receive rebates in addition to importation discounts.$7 billion in federal savings over 10 years (across all federal programs)īiden administration has supported the importation rule in court but gave no timeline for approval of state proposals Which drugs are subject to new minimum rebate.MACPAC adopted recommendations to increase rebate amounts on certain accelerated approval drugs $10 billion in federal Medicaid savings over 10 years Increase Minimum Rebate Amount for Certain Drugs Which drugs are subject to best price changes.Not likely to produce savings and may increase costsįinal rule issued December 2020 Biden Administration issued proposed rule delaying provisions on Prevalence of spread pricing across states.19 introduced in House and referred to Subcommittee on Health $929 million in federal Medicaid savings over 10 years Number and composition of drugs reaching the rebate cap.$17.3 billion in federal Medicaid savings over 2021-2031 (policy effective as of 2024)Įnacted in the American Rescue Plan ( P.L. Table 1: Federal Approaches to Address Medicaid Prescription Drug Spending The “best price” requirement provides significant discounts for federal and state Medicaid drug spending and policies that modify or eliminate Medicaid best price rules are likely to increase federal spending on Medicaid but may result in savings for other payers.Importation is unlikely to have a large effect on Medicaid spending. Allowing importation of drugs would likely result in significant federal savings, but these would be to programs other than Medicaid.State estimates suggest larger savings than estimates of federal proposals. Prohibiting spread pricing by pharmacy benefit managers (PBMs) would generate relatively small federal savings of nearly $1 billion over ten years, but the level of savings depends on state actions to address spread pricing and the extent of spread pricing across states.Other policies to increase Medicaid rebates, for example by increasing the minimum rebate amount for certain drugs, would likely generate similar scale potential savings for the Medicaid program.
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