Medicaid Benefits & Name Brand Drugs

As the demand and cost of prescription drugs continue to rise, healthcare insurers look for different ways to curb costs and keep healthcare coverage affordable. Just like other insurance carriers, the Medicaid insurance system manages prescription costs by reworking existing program options while maintaining Medicaid's benefit coverages. The Patient Protection and Affordable Care Act of 2010 incorporates provisions for Medicaid's handling of name brand drug coverages.

Affordable Care Act

• Through the Patient Protection and Affordable Care Act, Congress assigned new cost rates for manufacturers of name brand drugs. The new cost rates have to do with the rebates or discounts insurance programs get when paying for prescription drug benefits. The Affordable Care Act required manufacturers to offer state Medicaid programs the same or similar rebates as those offered to private insurance carriers. As a result of the Act, rebate rates for state Medicaid programs increased from 15.1 percent to 23.1 percent for name brand drugs. In effect, rebate rates provide drug prices comparable to the manufacturers' wholesale pricing rates.

Manufacturer Rebates

• A manufacturer rebate is the money a manufacturer pays back to a state Medicaid program (or other insurance carrier) whenever a Medicaid participant fills a prescription. Under the Affordable Care Act, rebate rates are one of the many conditions Medicaid requires when agreeing to cover a manufacturer's product under Medicaid's prescription coverage. As a result, drug manufacturers absorb some of the costs of rising drug prices. Additional rebate requirements also apply in cases where drug price increases exceed current inflation rates.

Generic Vs. Name Brand Drugs

• Medicaid "best practices" guidelines for dispensing prescription drugs requires doctors to prescribe generic drugs in the place of name brand drugs in cases where a generic prescription fulfills the treatment needs of the patient. Medicaid's "best practices" rule helps to keep prescription costs down, which works to protect Medicaid benefit coverages, according to the U.S. Department of Health & Human Services. In cases where a patient's treatment warrants the use of a name brand drug, doctors can still prescribe it provided they obtain prior authorization from their state's Medicaid administrator.

Cost-Sharing Measures

• Medicaid operates as a federally-funded system that channels program monies out to each state government. State governments handle the actual administration of Medicaid benefits so different states may have different requirements for copayments, deductibles and benefit coverages. Some states have adopted cost-sharing measures that require Medicaid recipients to "copay" or pay a nominal amount when filling a prescription, according to the U.S. Department of Health & Human Services. Name brand prescriptions typically carry larger copay requirements than generic drugs. An example of this would be a copay requirement of $1.00 for generic prescriptions and $4.00 for brand name drugs. In some states, certain populations, such as nursing home patients, pregnant women and children are exempt from state cost-sharing measures.