Raising Medicaid Rebates For Drugs With Accelerated Approval

Through the Accelerated Approval Program, the Food and Drug Administration (FDA) may approve drugs that treat severe or life-threatening conditions on the basis of preliminary evidence of efficacy. Many of these drugs are made available at extremely high prices. In April 2021 the Medicaid and CHIP Payment and Access Commission endorsed a policy that would require manufacturers of drugs receiving accelerated approval to pay higher rebates to Medicaid until their drug's efficacy is demonstrated in confirmatory postapproval studies. We examined the impact of this policy by studying Medicaid spending on eighty-nine accelerated approval drugs during 2015-20. Medicaid spent an estimated $6.7 billion on these drugs after estimated rebates under existing rules. Raising base rebates from 23.1 percent to 30-80 percent could have saved Medicaid $0.6-$5.2 billion during this six-year period; raising inflationary rebates by two to four times would have had a smaller impact, creating savings of up to $0.9 billion. Accelerated approval drugs represent a small but growing percentage of Medicaid's total prescription drug spending. The policy evaluated in this study can offer important savings, but implementation must account for the fact that many of these drugs have additional indications with regular FDA approval.