Health Care Reform

Affordable Care Act Will Save States and Taxpayers $17.7 Billion on Prescription Drugs

Proposed Rule Cuts Costs and Increases Transparency in Medicaid Prescription Drug Pricing

 WASHINGTON, D.C. – Provisions in the health care reform law, the Affordable Care Act, will save taxpayers and States an estimated $17.7 billion over five years on prescription drugs bought through Medicaid, according to estimates in a proposed rule issued today by the Centers for Medicare & Medicaid Services (CMS).  

Today’s announcement, implementing the Medicaid prescription drug provisions of the Affordable Care Act, will increase transparency in drug pricing and ensure taxpayers and States are not overpaying for prescription drugs.  

“Thanks to the Affordable Care Act, we will save taxpayers billions of dollars each year on prescription drugs in Medicaid,” said CMS Acting Administrator Marilyn Tavenner.  “Today’s announcement puts in place simple measures that will cut costs, increase transparency and benefit consumers.” 

The proposed regulation reduces costs through a number of improvements, including: 

  • Aligning reimbursement rates to better reflect the actual price the pharmacy pays for the drug;
  • Increasing rebates paid by drug manufacturers that participate in Medicaid, and;
  • Providing rebates for drugs dispensed to individuals enrolled in a Medicaid managed care organization.

Several States have implemented similar initiatives to inject fairness into prescription drug pricing.  Alabama, for example, estimates a savings of $30 million in one year alone from an initiative to better understand and align reimbursements with the prices pharmacies pay for prescription drugs. 

In 2009, Medicaid spent $15.8 billion on prescription drugs.  This proposed rule will implement initiatives designed to save the program $17.7 billion over five years. 

The Medicaid Pharmacy Regulation notice of proposed rulemaking can be found in the Federal Register at:

The Proposed Rule will publish in the Federal Register on February 2, 2012 at which time it can be viewed here –  The comment period will close on April 2, 2012.

Stakeholders will have 60 days from the publication date to submit public comments.  CMS plans to issue a final rule in 2013.


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