Key Findings. (1) The Medicaid Drug Rebate Program is highly effective. In 2016, rebates paid by drug manufacturers lowered Medicaid prescription drug costs by more than 51.3 percent, compared to rebate savings of only 19.9 percent in Medicare Part D. To help state Medicaid programs better address rising prescription drug costs, policymakers should consider proposals that build on and strengthen the rebate program, rather than weaken it. (2) Federal policymakers could consider options to strengthen the Medicaid Drug Rebate Program such as increasing the rebates to deter excessive launch prices and annual price increases, eliminating the cap on rebate amounts, and extending the rebate program to separate state CHIP programs. (3) State policymakers could adopt policies already available under federal law such as expanding and maximizing the supplemental rebates that states negotiate with drug manufacturers, increasing drug pricing transparency, and enhancing the use of drug effectiveness reviews.
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