Abstract A78: The effect of the Affordable Care Act Medicaid rebate increase on Medicaid drug prices for cancer
Authors: Bonakdar Ali 
Published: May 2016

Introduction: Prescription drug spending is a significant component of Medicaid's total expenditures. Numerous policies have aimed at controlling Medicaid prescription drug spending; however, these policies could have unintended impact on drug prices and utilization. One such policy is the Medicaid Rebate which under the Omnibus Budget Reconciliation Act of 1990 allows Medicaid to pay manufacturers the lowest price offered to any buyer. Under the Affordable Care Act (ACA), beginning in 2010, the Medicaid rebate for branded and generic drugs increased from 15.1 to 23.1 percent and from 11 to 13 percent of the average manufacturer price, respectively. It is unknown to what extent pharmaceutical companies will respond to this increase and how it may affect Medicaid oncology drug prices across states.

Objective: The purpose of this paper is to examine the impact of the ACA Medicaid rebate increase on oncology drug prices using Medicaid State Drug Utilization Data from 2006-2013. The outcomes of this study are Medicaid prices and Wholesale Acquisition Costs (WACs) for oncology drugs.

Methods: A pre-post study design with a generalized linear model was used to evaluate the impact of the Medicaid rebate increase on oncology drug prices after 2010 in all states excluding Arizona and Washington DC. I focused on 25 top-selling branded and 10 top-selling generic drugs for cancer in 2006, which constituted more than 90 percent of oncology drug sales.

Results: The results show that after the implementation of Medicaid rebate, average Medicaid prices for generic and branded oncology drugs increased by $10 and $134, respectively. However, Medicaid drug prices did not significantly change for competitive brand drugs-- those with generic substitutes. Additionally, post Medicaid rebate policy implementation, the average WACs for branded and competitive brand oncology drugs increased by $53 and $110, respectively.

Conclusions: The findings of this study demonstrate that the rise in Medicaid rebate significantly increased Medicaid prices and WACs for oncology branded drugs. Thus, the rise in Medicaid rebate not only escalates Medicaid drug prices but can also increase overall prescription drug costs by driving up the WACs. As expected, pharmaceutical companies would increase their drug prices to offset costs associated with increases in rebate. Since the ACA will increase the number of insured consumers who will receive drug benefits, increasing drug prices could undermine benefits of the ACA expansion as it could diminish drug adherence and the effectiveness of treatment due to unaffordable care. It can be anticipated that the gaps in drug coverage due to increasing prices will be larger among those residing in non-expansion states. Given the complexity and costs associated with cancer care, it is of utmost importance to ensure that disparities are not widened.

Citation Format: Ali Bonakdar. The effect of the Affordable Care Act Medicaid rebate increase on Medicaid drug prices for cancer. [abstract]. In: Proceedings of the Eighth AACR Conference on The Science of Health Disparities in Racial/Ethnic Minorities and the Medically Underserved; Nov 13-16, 2015; Atlanta, GA. Philadelphia (PA): AACR; Cancer Epidemiol Biomarkers Prev 2016;25(3 Suppl):Abstract nr A78.