OIG: Soaring Medicaid Brand-name Drug Prices Offset by Rebates

The costs of Medicaid's brand-name drugs grew at about three times the rate of inflation from 2005-2010, but that increase was offset by rebates to state programs, a federal audit shows.

The report from the Department of Health and Human Services Office of Inspector General found that brand-name drug payments by state Medicaid programs grew between 34% and 40% for the five year period, while overall inflation grew only 13%.

"For the 50 Medicaid brand-name drugs with the highest expenditures, total median increases in prices and payment amounts not only outpaced the inflation rate, but also outpaced total median increases in prices and payment amounts for brand-name drugs as a whole," the audit said.  

However, the audit also found that when drug manufacturers' rebates to state Medicaid programs were taken into account, "the per-unit net cost to Medicaid increased at a much lower rate than other points of comparison between 2005 and 2009 (rebate data were not available for 2010).

"In fact, Medicaid's rebate-adjusted payment amounts for brand-name drugs actually declined at the median in 3 of 4 years, lagging behind the inflation rate," the audit said.