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States' Collection of Offset and Supplemental Medicaid Rebates


To reduce Medicaid expenditures for prescription drugs, CMS and the State Medicaid agencies (States) have implemented the Medicaid drug rebate program. In addition, many States have negotiated supplemental rebate agreements (SRAs) with drug manufacturers to generate additional rebates and further reduce expenditures. The Affordable Care Act (ACA) increased Federal Medicaid rebates-by an amount referred to as the "offset rebate"-in a way that may affect States' collection of supplemental Medicaid rebates.


In February 2013, we emailed surveys to 51 States. In the survey, we asked each State to report the total amount of offset rebates for 2011 and 2012. We then asked each State whether it had an SRA and, if so, to provide the total amount of supplemental rebates collected for drugs dispensed between 2010 and 2012. We also asked each State with an SRA in effect to describe its policies and procedures as they relate to calculating supplemental rebates and to describe how recent changes related to the ACA have affected the State's collection of supplemental rebates. We received responses from all 51 States.


Forty-eight States reported $2 billion in ACA offset rebates for 2011 and 2012, and 44 States reported collecting $1.7 billion in supplemental Medicaid rebates during the same time period. We also found that the method most States used to calculate supplemental rebates may reduce rebate amounts. Finally, we found that six States reported making changes to their SRAs as a result of changes related to the ACA.


We recommend that CMS ensure that all States appropriately report offset rebate amounts. We also recommend that CMS consider further whether all States should be encouraged to establish supplemental rebate programs and to encourage States to explore alternate methods for calculating supplemental rebates. CMS concurred with all three recommendations.