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Medicaid pays less than Medicare for many prescription drugs, report finds

The New York Times, August 16, 2011

Medicaid gets much deeper discounts on many prescription drugs than Medicare, in part because Medicaid discounts are set by law whereas Medicare prices are negotiated by private insurers and drug companies, federal investigators said Monday in a new report. The report, from the inspector general of the Department of Health and Human Services, could be used by lawmakers trying to cut drug prices as Congress looks for ways to rein in the cost of Medicare under the new deficit-reduction law. Under existing law, the Congressional Budget Office estimates that the cost of Medicare's outpatient drug benefit will increase an average of nearly 10 percent a year, to $175 billion in 2021, from $68 billion this year. Medicaid and Medicare receive discounts in the form of rebates, which are paid by drug manufacturers when their products are dispensed to people enrolled in the programs.