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

John Commins, for HealthLeaders Media, August 19, 2011

The OIG study had been requested by U.S. Sen. Bill Nelson (D-FL) after AARP published its own study last summer showing a significant increase in the cost of brand-name prescription drugs since 2002.  

The OIG study looked beyond the reported increases in published prices – which do not often represent the actual price that is paid -- and examined changes in transaction-based prices, and the financial effect of price changes on Medicaid.

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Since 2006, Medicaid payments for prescription drugs have remained relatively steady. In 2009, Medicaid drug expenditures totaled approximately $26 billion (not including rebates). Brand-name drugs generally account for about 80% of the total dollars reimbursed.  However, Medicaid recouped approximately one-third of its costs for prescription drugs between 2006 and 2009, an average annual savings of about $8 billion, OIG said.

Drug makers pay higher rebates for brand-name drugs than for generic drugs. From 1996 to 2009, the unit rebate amount (URA) for a generic drug was 11% of the wholesale price and the basic URA for a brand-name drug was the around 15%, OIG said.

John Commins is a senior editor with HealthLeaders Media.