Under the Medicaid program, states receive large rebates from drug manufacturers but, in exchange, must cover essentially all prescription drugs as soon as they enter the market. This coverage requirement creates challenges for states to develop appropriate clinical coverage criteria. During this session, the Commission considered a potential recommendation to implement a grace period during which a state would be allowed to exclude or otherwise restrict coverage of a new drug while the state develops its coverage criteria.
The Commission also considered a potential recommendation to raise or remove the Medicaid drug rebate cap. Medicaid drug rebates are capped at 100 percent of the drug’s average manufacturer price. This cap generally applies to drugs that have substantial price increases, and thus, large inflationary rebates. Raising or removing the rebate cap would allow the Medicaid inflationary rebate to continue to exert downward pressure on price increases.