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GPhA Urges Congress to Repeal Medicaid Rebate Penalty

Contact: Steve Arnoff 202.249.7113

WASHINGTON, DC (April 28, 2016) — Today, the Generic Pharmaceutical Association (GPhA) sent a letter to the Chairmen and Ranking Members of the Senate Finance Committee and House Energy and Commerce Committee expressing deep concerns that the recently enacted Medicaid rebate penalty on generic drugs could drive up drug costs and hinder patient access to more affordable medicines. At issue is Section 602 of the Bipartisan Budget Act (BBA) of 2015, which amends Medicaid rebate policy to impose a new penalty on generics for price increases exceeding inflation in rebate periods beginning in 2017.

“Experts know that generic drugs drive savings, not costs,” said Chip Davis, President and CEO, GPhA. “This misguided provision could put billions of dollars in patient savings at risk and should be immediately repealed.”

A Department of Health and Human Services (HHS) ASPE issue brief states “Our review of evidence strongly supports the conclusion that generic drug prices are not an important part of the drug cost problem facing the nation. In fact, about two-thirds of generic products appear to have experienced price declines in 2014.”

A recent report by AARP, Trends in Retail Prices of Prescription Drugs Widely Used by Older Americans, 2006 to 2013, identifies brand and specialty drugs as the key drivers of growing drug costs, while noting that generic drug costs continue to decline. AARP notes that “these findings are entirely attributable to strong drug price growth among brand name and specialty drugs, which more than offset substantial price decreases among generic drugs.”

The GPhA letter states, “By applying a policy solution developed for brand manufacturers to the very different competitive market of generic drugs, this provision can increase costs, and endanger generic drug development and viability in the marketplace. The rebate also puts Medicaid beneficiaries, some of our nation’s most vulnerable patients, in a position where they have fewer generic options than currently exist, which could lead to increased costs to the program and state budgets.”

Medicaid saved $33.5 billion in 2014 because of generic drugs, according to the 2015 Generic Drug Savings in the U.S. report. In fact, without generic drugs, prescription drug costs for Medicaid would have nearly doubled.

“This Medicaid rebate increase will add significant hurdles to generic drug investment and development, making it harder for generics to remain available as more affordable alternatives to expensive brand medications,” said Davis.

“GPhA feels strongly that this provision should be repealed in favor of alternative policies that enhance, rather than harm, patient access to affordable, quality generic medicines that benefit millions of Americans and control overall health spending,” the letter concludes.

Click here to read the full letter.

About GPhA
GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry. Generic pharmaceuticals fill 88 percent of the prescriptions dispensed in the U.S. but consume just 28 percent of the total drug spending. Additional information is available at Follow us on twitter: @gpha.