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OIG report: Generic drug rebates could have saved Medicaid $1.4B


Medicaid could have saved more than $1.4 billion in the past decade if companies were required to provide rebates whenever prices for best-selling generic drugs exceeded the inflation rate, according to a new report.

The Department of Health and Human Services' Office of the Inspector General (OIG) report reviews the top 200 generic drugs, as ranked by Medicaid reimbursement, for each year from 2005 through 2014. A total of 869 drugs were in the top 200 generic drugs at least once during the 10 years, and the OIG assigned each drug a baseline average manufacturer price (AMP) and compared each quarterly AMP to the inflation-adjusted baseline AMP.

The report found that for 22 percent of the quarterly AMPs, generic drug prices exceeded the inflation rate. Additionally, it notes that if rebates had been required for the top 200 generic medicines, Medicaid could have saved more than $39 million in 2005 and more than $464 million in 2014.

Under current law, brand-name drug makers are required to pay an additional rebate to Medicaid, but generic drug makers are not, according to a report from STAT. However, an increase in generic drug prices due to manufacturing problems has forced some companies to discontinue production, making it possible for competitors to boost prices, especially if fewer alternative medicines remained on the market.

The OIG report recommends the Centers for Medicare & Medicaid Services consider seeking legislative authority to extend the additional rebate provisions to generic drugs, which would apply to rebate periods beginning with the first quarter of 2017.

High drug prices have continued to be a hot topic in the healthcare industry, with the trend putting pressure on health insurers' margins and plan members. In an attempt to curb these drug cost increases, at least seven states have passed legislation to lower the burden of high-price prescription drugs. Further, a Government Office of Accountability report in November found that high drug costs were concentrated among a small number of drugs and conditions.

To learn more:
- read the OIG report
- read the STAT article

Related Articles:
States, private Medicaid plans address rising drug costs
Health plan CEOs: Prescription drugs pose major cost concerns
GAO: New drugs account for highest costs in Medicare Part B