Affordable Access to Medicines in Medicaid

While the federal government provides general guidelines, each state designs their own Medicaid program and decides whether to provide prescription drug coverage, which is an optional benefit under the program. Biopharmaceutical manufacturers play a critical role in promoting the health of Medicaid beneficiaries and ensuring innovative medicines are affordable for both patients and taxpayers.

Through the Medicaid Drug Rebate Program, manufacturers enter into agreements with the federal government to provide rebates on medicines in exchange for states providing guaranteed access to those medicines in their Medicaid program. The goal is to ensure state Medicaid programs get the lowest net price, saving the states and the federal government money and allowing the program to finance coverage for low-income populations. Additionally, manufacturers can choose to offer supplemental rebates to states as well. This system has worked well over the years, with Medicaid spending on prescription medicines remaining low. In 2022, retail prescription drugs made up just 5.6% of all Medicaid spending, while total rebates from drug manufacturers reached $48.5 billion — a 39% increase from 2017.

Medicaid’s guaranteed coverage also enhances adherence to medicines, which helps individual patients stick to treatment plans outlined by their medical professional. To encourage adherence and to make medicines accessible, Medicaid copayments are capped at $8 and may cost as little as $0 for enrollees with income at or below 150% of the federal poverty level. When patients can better afford their medicines, they are more likely to remain consistent with taking the prescribed doses. Adherence also generates savings for the health care system as a whole by reducing the number of hospitalizations needed.

Access to care provided under Medicaid can also improve health equity. While private insurance is the primary source of coverage across racial and ethnic groups, Medicaid helps to fill gaps in this coverage for underserved communities disproportionately impacted by chronic conditions, like asthma and diabetes. For example, Medicaid provides coverage to 40% of expectant mothers nationwide. For Black Americans and American Indian and Alaska Natives who have higher rates of pregnancy-related mortality, Medicaid coverage jumps to over 66%, and can make a difference in the post-natal outcomes of mothers and babies.