The Medicaid Drug Rebate Program (MDRP) was created by Congress nearly 30 years ago. It requires drug manufacturers to pay a rebate for all out-patient drugs dispensed to Medicaid beneficiaries. The percentage for this rebate varies by type of drug, with brand-name drugs requiring the greatest rebate and generics the least. In addition, the rebate must rise until it ensures that the net (of rebate) price of the drug matches the best price available to anyone in the private market. (MDRP is often referred to as the Medicaid “best price” policy.) Finally, there is an inflation penalty — an additional rebate equal to the amount by which the price increase exceeds the rate of inflation, measured by the Consumer Price Index for All Urban Consumers (CPI-U).
