Medicaid drug costs are much lower than Medicare Part D costs, report finds

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Medicaid's net unit drug costs are much lower than costs under Medicare Part D, which is attributed to higher Medicaid rebates for brand name medications, according to a new report.

A study compared pharmacy reimbursements and rebates for Medicare Part D and Medicaid based on 100 brand-name and 100 generic medications with the highest Medicare payouts. Results, published by the Department of Health and Human Services' Office of the Inspector General, found Part D sponsors and state Medicaid programs spent about the same amount on brand-name drugs. But Medicaid recouped 45% of its spending on rebates while Part D only garnered 19% of their total in rebates.

There are about 30 million seniors and disabled individuals who receive medications through Part D, while more than 50 million impoverished people have drug coverage through Medicaid. Drug coverage has drawn increased scrutiny from lawmakers as they try to decrease Medicare costs.

According to the OIG, Part D sponsors negotiate rebates with pharmaceutical manufacturers. Federal law, however, dictates how the discount or rebate is configured under Medicaid.

“Medicaid rebates for brand-name drugs may increase as a result of ACA provisions that raise the rebate percentage,” the report states. "Given the potential impact on beneficiary and government expenditures, we believe that it is important for CMS to continually examine any differences in how each program collects rebates.”