Medicaid Payment for Generic Drugs: Achieving Savings and Access

Document Type

Issue Brief

Publication Date



Medicaid payment for generic prescription drugs has been a point of contention for the pharmacy industry over the past few years because of reimbursement formula changes contained in the Deficit Reduction Act (DRA) of 2005. The Patient Protection and Affordable Care Act (PPACA) includes provisions to resolve some of these issues. The DRA reduced the maximum amount the federal government would pay state Medicaid programs for generic drugs, and the Centers for Medicare & Medicaid services (CMS) final regulation, to implement the DRA provisions was met with a lawsuit from the pharmacy industry. An injunction by the federal district court, followed by a congressional moratorium, kept CMS from implementing the regulation and kept the pre-DRA formula for the generic drug payment limit in place. PPACA provisions increase maximum federal reimbursement levels for Medicaid generic drugs, but the impact on the pharmacy industry depends on CMS implementation and state policies. This paper examines Medicaid payment for generic drugs, the DRA and PPACA changes to generic drug reimbursement, the concerns of the pharmacy industry, and the potential impact on access.


Issue brief no. 839

Open Access


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