3 Not all states impose cost-sharing for prescription drugs, 4 and some beneficiary groups are exempt from cost-sharing requirements. Federal rules limit beneficiary cost-sharing to nominal amounts: up to $4 for preferred drugs and $8 for non-preferred drugs, for individuals with incomes at or below 150% of the federal poverty level (FPL) and slightly higher for those with higher incomes. Due to Medicaid’s role in financing coverage for high-need populations with low incomes, it is designed to provide access to prescription drugs with little cost to enrollees. The MDRP affects state and federal Medicaid payment for prescription drugs, while Medicaid beneficiaries’ out of pocket cost for drugs is limited to nominal amounts set in statute. Though the pharmacy benefit is a state option, all states cover it, but, within federal guidelines about pricing and rebates, administer pharmacy benefits in somewhat different ways. In exchange, Medicaid programs cover nearly all of the manufacturer’s FDA-approved drugs, and the drugs are eligible for federal matching funds. Manufacturers must also enter into agreements with other federal programs that serve vulnerable populations. 1, 2 Under the program, a manufacturer who wants its drug covered under Medicaid must enter into a rebate agreement with the Secretary of Health and Human Services stating that it will rebate a specified portion of the Medicaid payment for the drug to the states, who in turn share the rebates with the federal government. In response to rising drug prices and projected increased Medicaid spending, the Medicaid Prescription Drug Rebate Program (MDRP) was created in 1990 by the Omnibus Reconciliation Act. What is the Medicaid drug rebate program and how does it work? What are policy proposals related to the MDRP?.How does the 340B program interact with the MDRP?.What is the role of managed care plans and pharmacy benefit managers in Medicaid rebates?.This brief explains the MDRP to help policymakers and others understand how Medicaid pays for drugs and any potential consequences of policy changes for the program by answering the following questions: Policymakers are also currently debating significant changes to payment for prescription drugs through Medicare and commercial insurers that may also have implications for Medicaid and the MDRP as well. Without Medicaid, many prescription drugs would be prohibitively expensive to low-income beneficiaries. Both state and federal policymakers are undertaking efforts to control prescription drug costs, and there is renewed policy interest in the Medicaid Prescription Drug Rebate Program (MDRP) as part of these efforts. Prescription drug coverage is a key component of Medicaid for many beneficiaries who rely on medications for both acute problems and for managing ongoing chronic or disabling conditions. Medicaid provides health coverage for millions of Americans, including many with substantial health needs. Drug prices are at the center of health policy debates at both the state and federal levels.
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