Recent Law for Medicaid Drugs Impacts Private Health Plans

A recent law specific to Medicaid is impacting drug costs in general. In your pharmacy rebate report, there’s a section that lists drug rebates impacted by the new law.

What does this mean

These medications are now lower-cost at point of sale. This means the members and the plan pay less.

When manufacturers responded with lower cost medications, they also decreased rebates on these medications. Since rebate terms were set before the full impacts of this pricing change were known, 2024 rebate terms assumed a certain level of rebates on these medications. As a result, Premera has applied an adjustment based on rebates received on these medications while showing the actual reduced amount paid and the savings generated.

More about the new law

Under the Medicaid Drug Rebate Program, drug manufacturers who want their drugs covered by Medicaid are required to rebate a specified portion of the Medicaid payment back to the Medicaid program.

These rebates are paid every quarter and are shared between the states and the Federal government to offset the overall cost of prescription drugs under the Medicaid program.

Until early this year, there was a cap on rebates of 100% of the Average Manufacturer Price (AMP). As a provision of the American Rescue Plan Act of 2021 (ARPA), the cap was removed January 1, 2024. This caused a considerable rise in Medicaid rebate liability for some manufacturers, who responded with a reduction in their drug list pricing and associated drug rebate amounts.

These reductions have greater impact in certain categories of drugs, like those that treat diabetes, chronic lung disease (COPD), asthma, and potentially others.