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New rule on Medicaid prescription drug rebates to save billions

CMS: reforms to save money for state, federal governments

hand waves money in front of capitol buildingJan. 22, 2016 - In order to effectively implement provisions of the Affordable Care Act, the Centers for Medicare and Medicaid Services (CMS) finalized a rule today detailing reforms to the rebate and reimbursement systems for Medicaid prescription drugs, which will save federal and state governments an estimated $2.7 billion over five years.

The Affordable Care Act substantially reformed Medicaid payments for prescription drugs, increasing rebates and setting limits on federal reimbursements. 


The “Covered Outpatient Drugs” final rule ensures those reforms will be effectively implemented by providing further detail on how those reimbursements and rebates are calculated, part of CMS’ broader efforts to help ensure affordability and accessibility of prescription drugs, while supporting pharmaceutical innovation.

“Millions of Medicaid beneficiaries rely on prescription medications to manage chronic illnesses or treat acute conditions. But recently, the cost of prescription drugs has been rising rapidly, creating fiscal pressure and potentially compromising beneficiary access” said Vikki Wachino, CMS deputy administrator and director of the Center for Medicaid and CHIP Services.

“This final rule makes changes that will save taxpayers billions and ultimately improve beneficiary access to prescription drugs.”

The rule establishes the long term framework for implementation of the Medicaid drug rebate and reimbursement programs.  The new definitions detailed in the rule will ensure that Medicaid rebates accurately account for market prices, maximizing taxpayer savings. 

The rule will also close loopholes, incentivize pharmacies to utilize generic drugs by ensuring proper reimbursements for their cost, and give territories additional tools to manage Medicaid drug costs. 

CMS News Release Note: This rule is an important step in the federal government’s efforts to address the rise in prescription drug costs.  As part of that ongoing effort, on Friday, November 20, 2015, HHS and CMS hosted a forum that brought together consumers, providers, employers, manufacturers, health insurance issuers, representatives from state and federal government, and other stakeholders to share information and discuss ideas to increase access to information, drive innovation, strengthen incentives and promote competition. For more information on the forum, visit the forum’s website at

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