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Medicaid Prescription Drug Rule Saves $17.7 Billion, U.S. Says

Medicaid spending on prescription drugs will fall about $17.7 billion over five years under a rule that shifts more of the cost to drugmakers and pharmacies, the Centers for Medicare and Medicaid Services said.

The rule issued today carries out provisions in the U.S. 2010 health-care law that raised the rebates that drugmakers led by Pfizer Inc. (PFE) pay each time their products are dispensed to Medicaid patients. Medicaid is the joint federal-state health insurance program for the poor.

The rebates also apply to drugs sold by managed-care insurance plans that administer Medicaid benefits. Medicaid payments to pharmacies would additionally be pared by about $4 billion over five years under the rule.

The rule “puts in place simple measures that will cut costs, increase transparency and benefit consumers,” said Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services, in a statement.

Medicaid spent about $26 billion for drugs in 2009 and recouped $9 billion in rebates, according to an August report from the Office of Inspector General for the Health and Human Services department.

Brand-name drugmakers now pay rebates of at least 15 percent on the average price they charge for their medicines. The minimum rebate would rise to 23 percent. For generic-drug manufacturers, rebates would rise from 11 to 13 percent of their average prices.

The federal government would save $13.7 billion while states would save $4 billion, the U.S. said.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net

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