CMS rule would increase Medicaid drug pricing transparency, save $17.7 billion

A new proposed rule on medication pricing transparency would save an estimated $17.7 billion over five years on prescription drugs bought through Medicaid, according to estimates issued last Friday by the Centers for Medicare & Medicaid Services (CMS).

The CMS rule, which implements prescription drug provisions of the Affordable Care Act, would increase transparency in drug pricing to ensure states are not overpaying for prescription drugs. 

According to CMS, the proposed regulation reduces costs by aligning reimbursement rates to better reflect the actual price the pharmacy pays for the drug. It would also increase rebates paid by drug manufacturers that participate in Medicaid and provide additional rebates for drugs dispensed to individuals enrolled in a Medicaid managed care organization.

Medicaid spent $15.8 billion on prescription drugs in 2009, CMS said.

A report released last year by conservative think tank organization American Enterprise Institute blamed Medicaid for wasting $329 million in 2009 on purchasing brand-name drugs instead of generics. The antipsychotic Risperdal, commonly used in nursing homes, could have saved Medicaid $60 million alone if prescribed in its generic form, according to that report.

The comment period on the proposed rule closes April 2, 2012.