Medicaid Drug Rebate Program

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The Medicaid Drug Rebate Program is a program in the United States that was created by the Omnibus Budget Reconciliation Act of 1990 (OBRA'90).

It requires that drug manufacturers have a national rebate agreement with the Secretary of the Department of Health and Human Services (HHS) in order for states to receive Federal Medicaid coverage of their products. In 2007, 550 pharmaceutics companies participated in the Medicaid Drug Rebate Program and 49 states in addition to the District of Columbia supply drugs under the Medicaid Drug Rebate Program. In order for manufacturers to be eligible for Medicaid coverage a rebate agreement must be signed with Centers for Medicare and Medicaid Services (CMS).[1]

Section 606 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) amended Section 1927(a)(1) allowing states to have the option of different rebate effective dates. This section states that agreements to the rebate program that have been entered on or after November 29, 1999 may go into effect that day, and states option, any date after up to the first day of the quarter.[2]

At the time the law was enacted, managed care organizations were excluded from access to the drug rebate program. In 1990, only 2.8 million people were enrolled in Medicaid managed care and so the savings lost by the exemption were relatively small. Today, 21 million people are enrolled in capitated managed care plans.

The Drug Rebate Equalization Act of 2009 (DRE), introduced in the 111th United States Congress by Representative Bart Stupak as H.R. 904, and in the Senate by Senator Jeff Bingaman as S. 547, would equalize the treatment of prescription drug discounts between Medicaid managed care and Medicaid fee-for-service. In offering Medicaid managed care plans access to the Medicaid drug rebate, this policy is seen as a way to provide relief for federal and state budgets, thereby mitigating the need for added cuts to Medicaid benefits or populations, and for drug carve outs, which negatively impact clinical care for Medicaid enrollees. The Congressional Budget Office has scored the DRE as saving $11 billion over ten years.[3] This proposal has also been included in President Barack Obama’s 2010 United States federal budget.[4] The DRE passed in both the House and Senate as part of their respective comprehensive health care reform legislation, and was signed into law on March 23, 2010 by President Obama with the Patient Protection and Affordable Care Act. The DRE became effective upon enactment.


  1. ^ Overview of the Medicaid Drug Rebate Program Archived 2007-12-14 at the Wayback Machine, U.S. Department of Health & Human Services.
  2. ^ History of the Medicaid Drug Rebate Program Archived 2006-09-27 at the Wayback Machine, U.S. Department of Health & Human Services.
  3. ^ Health Care Budget Options, Volume 1 (December 2008), Congressional Budget Office
  4. ^ President's Budget for FY2010 Office of Management and Budget