*This is an archive page. The links are no longer being updated. 1991.02.20 : Medicaid Pharmaceutical Rebates Contact: Bob Hardy (202) 245-6145 February 20, 1991 HHS Secretary Louis W. Sullivan, M.D., has called on pharmaceutical companies to sign agreements by March 1 providing cost-saving rebates for state Medicaid programs. At the same time, he told governors in a letter that HHS will be closely monitoring implementation of the new rebate program "to ensure that the intent of the law is properly carried out." Under a provision of last year's Omnibus Budget Reconciliation Act, drug companies wishing to provide pharmaceuticals through the Medicaid programs must agree to provide rebates to the Medicaid programs. This assures the states the discount prices on drugs that are available to other volume purchasers of prescription drugs. The rebates to states will also achieve cost savings for the federal government by reducing the matching funding provided to state Medicaid programs. Total savings for the federal and state governments are estimated at $55 million during the current phase-in year, and $460 million in FY 1992. At the same time, Secretary Sullivan said savings from lower drug costs should help bring about greater access to drugs or other health services for Medicaid beneficiaries. In a letter to all governors, Dr. Sullivan said, "In the coming weeks, I will be signing agreements with drug companies to implement the rebate provisions. I am asking you to work hard to ensure that the lower costs your Medicaid program incurs as a result of these agreements will be associated with an appropriate improvement in access to drugs or other needed services for your beneficiaries." Rebate agreements must be signed by pharmaceutical companies before March 1 for companies wishing to have their drugs available through Medicaid programs during the March-June period. Under the new law, any company not signing an agreement by that date would be excluded from reimbursement by Medicaid programs at least until July 1, if an agreement was signed by that date. Gail R. Wilensky, Ph.D., administrator of HHS' Health Care Financing Administration, said, "Our commitment to serving the health care needs of the poor requires us to achieve the greatest possible benefit from the funds allocated to this vital mission. Expanding access to needed prescription drugs depends on our ability to restrain Medicaid program costs for this purpose to acceptable levels. "Because of the great volume of Medicaid prescription drug purchases, it is important that manufacturers offer the lowest possible prices to state Medicaid programs." Medicaid programs serve 27 million lower-income Americans. Total Medicaid spending by state and federal governments this year is estimated at $104 billion. Total Medicaid spending for drugs this year is estimated at $5.1 billion. The rebate agreement and related instructions are available from (301) 966-3249 or by writing to the HCFA Medicaid Bureau, P.O. Box 26686, Baltimore, Md., 21207-0486. ###