The Prescription Drug Marketing Act of 1987 doubled America’s drug prices compared with all nations
except Canada. This increased Medicaid drug costs which are 18% of total sales. Each state Medicaid
Plan tried but could not reduce drug prices. They considered dropping these “voluntary” but
effective benefits. Congress worked on a national plan to reduce Medicaid drugs costs. They knew
they would have to do reduce drug prices for Medicare as all drug prices increased in price rapidly
In 1990 Congress passed the Omnibus Budget Reconciliation Act (OBRA 1990). This included “state
mandates to improve understanding of medications by Medicaid beneficiaries for whom they were
prescribed and dispensed, as state Medicaid agencies set up the programs mandated by OBRA ’90,
pharmacy providers are responsible for performing many required provisions. This included:
effective January 1, 1993: prospective Drug Use Review, Patient Counseling and Maintaining Proper
Patient Records. All drug manufacturers had to have a national rebate agreement with the Secretary
of the Department of Health and Human Services (HHS) to receive Federal Medicaid coverage of their
drug dispensed to Medicaid recipients, effective January 1, 1991. To be eligible for Medicaid
coverage a rebate agreement must have been signed with the Health Care Finance Administration
This Medicaid Drug Rebate Program [MDRP] is a voluntary program for any FDA registered drug
manufacturer who wants to participate can join or not. The manufacturer could drop out by notifying
CMS, who notifies Medicaid Directors, who notifies retailers.
Chain pharmacies by from Brands at high discounts and dispense the Top 200 drugs. They repackaged
these drugs using brand named manufacturers NDC’s to gain 20% more profit than independent
pharmacies (most Medicaid recipients bought their drugs from independent pharmacies, and would be
forced to close. So, brand drug manufacturers switched repackaging operations to wholesalers. All
the repackaged drugs used brand manufacturers NDC’s, which keyed rebate invoices. The invoices were
disputed and not paid on repackaged drugs using brands’ “unique” NDC’s. Brand manufacturers gave
repackagers their “Best Prices” which increased rebates from 15% to “Best Price” rebates of 30%.
All “pills” and prescriptions filled and paid for at “full list price” by Medicaid are reported to
all states and CMS on Drug Utilization Reports. Additionally, all amounts spent and rebates
received to CMS quarterly requests for “matching federal funds” are also reported to the states and
the Drug Utilization Reports. Totals are annually reported publicly in Medicaid Financial
When comparing the data, there are $57 billion in unpaid rebates, supposedly doubled or tripled in
False Claims Act cases. Drug usage reports are at:
Medicaid Financial Management Reports in “peer reports show what wasn’t paid.
For 40 years Medicaid told both taxpayers and Congress that they had to wait to chase down
those who defraud Medicaid, after they discover the fraud? Now nobody chases fraud anymore!