Review of Generic Drug Price Increases

Generic drug price increases exceeded the specified statutory inflation factor applicable to brand-name drugs for 35 percent of the quarterly average manufacturer prices reviewed.  If the provision for brand-name drugs were extended to generic drugs, the Medicaid program would receive additional rebates.  By applying the method in the Social Security Act for calculating additional rebates on brand-name drugs to generic drugs we calculated that the Medicaid program would have received a total of $966 million in additional rebates for the top 200 generic drugs, ranked by Medicaid reimbursement, from 1991 through 2004.

We recommended that the Centers for Medicare & Medicaid Services (CMS) consider seeking legislative authority to extend the additional rebate provisions to generic drugs.  CMS agreed to consider the recommendation when it considers future legislative proposals.