Medicaid paid significantly less than Medicare for the same drugs because Medicaid requires so-called rebates from pharmaceutical firms, according to a report issued Tuesday by the HHS inspector general (PDF).
Medicaid pays less for drugs than Medicare: report
The comparison focused on prices paid for the top 100 brand-name drugs and the top 100 generic drugs, based on 2009 Medicare spending.
Among those drugs, Medicaid used rebates—required by the federal law—to recoup $2.9 billion, or 45%, of the $6.4 billion it spent on them. In comparison, Medicare's Part D program used rebates negotiated by insurers to recoup $4.5 billion, or 19%, of the $24 billion it spent on the same drugs, according to the report required by the Patient Protection and Affordable Care Act.
The federal government is statutorily barred from drug price negotiations within Medicare.
In 2009, total Medicaid drug spending was nearly $26 billion, and Part D expenditures were $61 billion.
The finding of higher relative drug costs under Medicare may bolster the push by some congressional Democrats for federal authority to negotiate drug prices as a way to reduce the program's long-term costs.
Various types of federal drug price negotiating authority in Medicare were endorsed by several recent deficit-reduction proposals, including the Domenici-Rivlin plan, the Bowles-Simpson proposal, and President Barack Obama's April “framework.”
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