Summary of 1990 Medicaid drug rebate legislation. ASHP Government Affairs Division

Provisions of the federal Omnibus Budget Reconciliation Act of 1990 that are designed to control federal and state outlays for prescription drugs by requiring rebates from drug manufacturers to state Medicaid programs are described, and their potential effects on pharmacy practice in organized health-care settings are discussed. As of January 1, 1991, for a manufacturer's drug product line to be eligible for any coverage under Medicaid, the manufacturer must provide rebates to all state Medicaid programs. Health maintenance organizations are exempt from the law. Hospitals that dispense outpatient drugs to Medicaid patients under a formulary system and that bill Medicaid not more than purchase costs are exempt. The law requires no immediate action by hospitals and other organized care settings; action may be required when provisions of the law concerning drug-use review programs and patient counseling become effective. If a state enters a rebate agreement, its Medicaid plan must permit coverage of all of a manufacturer's prescription drug products, but the law does not affect formulary systems of individual health-care institutions. Formulary issues, the scope of hospital exemption, and pharmacist participation in DUR activities and patient counseling need to be clarified as state Medicaid plans are amended to comply with the law; pharmacists in organized health-care settings can best influence these changes through action at the state level.