Issue Brief

No. 839

Medicaid Payment for Generic Drugs: Achieving Savings and Access
September 30, 2010


Christie Provost Peters


Medicaid payment for generic prescription drugs has been a point of contention for the pharmacy industry over the past few years because of reimbursement formula changes contained in the Deficit Reduction Act (DRA) of 2005. The Patient Protection and Affordable Care Act (PPACA) includes provisions to resolve some of these issues. The DRA reduced the maximum amount the federal government would pay state Medicaid programs for generic drugs, and the Centers for Medicare & Medicaid services (CMS) final regulation, to implement the DRA provisions was met with a lawsuit from the pharmacy industry. An injunction by the federal district court, followed by a congressional moratorium, kept CMS from implementing the regulation and kept the pre-DRA formula for the generic drug payment limit in place. PPACA provisions increase maximum federal reimbursement levels for Medicaid generic drugs, but the impact on the pharmacy industry depends on CMS implementation and state policies. This paper examines Medicaid payment for generic drugs, the DRA and PPACA changes to generic drug reimbursement, the concerns of the pharmacy industry, and the potential impact on access.

Related Materials

For more information on this topic, see

See also these related NHPF papers: "The Medicaid Drug Rebate Program," The Basics, April 13, 2009, and "Average Wholesale Price for Prescription Drugs: Is There a More Appropriate Pricing Mechanism?"  Issue Brief 775, June 7, 2002.


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