Georgia Medicaid Drug Rebate Program Guide 2026

By Brevy Care Team

What is the Medicaid Drug Rebate Program?

The Medicaid Drug Rebate Program (MDRP) is the federal-state drug rebate program codified at Section 1927 of the Social Security Act, 42 U.S.C. § 1396r-8. It was added to federal law by Section 4401 of the Omnibus Budget Reconciliation Act of 1990 — Public Law 101-508, signed by President George H.W. Bush on November 5, 1990.

In plain terms: if a drug manufacturer wants its drugs to be covered by Medicaid (and effectively every manufacturer does, given that Medicaid is the largest single payer for prescription drugs in the United States), the manufacturer must sign a National Drug Rebate Agreement (NDRA) with the U.S. Department of Health and Human Services. Under that agreement, the manufacturer agrees to pay quarterly rebates to state Medicaid programs for the drug. In exchange, state Medicaid programs cover the drug.

The rebate amount is calculated using a national formula written into the statute:

• Brand drugs (innovator/single-source drugs): the rebate is the greater of (a) 23.1% of Average Manufacturer Price (AMP), or (b) AMP minus Best Price, plus an inflation adjustment when AMP has risen faster than the Consumer Price Index for All Urban Consumers (CPI-U) since the drug's launch date.
• Generic drugs (non-innovator multiple-source drugs): the rebate is 13% of AMP, plus an inflation adjustment (added by the Bipartisan Budget Act of 2015, effective Q1 2017).

The result: for many brand drugs, especially those with significant price growth, the effective Medicaid rebate can exceed 50% or even 75% of AMP — meaning state Medicaid programs pay only a fraction of the list price after rebates.

The Medicaid Drug Rebate Program is administered by the Centers for Medicare & Medicaid Services (CMS), specifically the Medicaid Drug Programs group within the Center for Medicaid and CHIP Services. CMS maintains the National Drug Rebate Agreement database, publishes Unit Rebate Amount (URA) data to states, audits manufacturer compliance, and operates the program's data systems.

The Medicaid Drug Rebate Program is also the statutory companion to the 340B Drug Pricing Program. The 340B ceiling price for any drug is calculated as AMP minus the URA that would apply under MDRP. The two programs share a definitional and computational foundation. Understanding MDRP is essential for understanding 340B, dual-eligible drug economics, and the broader federal drug pricing landscape.

Why the Medicaid Drug Rebate Program matters for Georgia eldercare

For Georgia seniors and their families, the Medicaid Drug Rebate Program operates in the background of every Medicaid pharmacy transaction. Most beneficiaries never see a rebate — the manufacturer pays the rebate to the state quarterly after the prescription has been dispensed and reimbursed. But the program's economics shape what drugs Georgia Medicaid covers, what it pays, and what it lists on the Preferred Drug List (PDL).

Specifically for Georgia:

• Georgia Medicaid pharmacy spending is reduced by tens of millions of dollars annually through MDRP rebates. The effective net cost of brand-drug Medicaid coverage in Georgia is often well below the gross fee-for-service amount initially paid.
• Dual-eligible Georgia seniors receive Medicare Part D drug coverage as their primary drug benefit, but Georgia Medicaid wraps around Part D for low-income subsidy coordination and certain excluded drugs.
• Georgia Families MCOs (Amerigroup, CareSource, Peach State Health Plan, WellCare/Centene) administer Medicaid managed care drug benefits with embedded rebate economics. Since ACA Section 2501 expanded MDRP to managed care drugs in 2010, the state captures rebates on MCO-dispensed drugs.
• Georgia Medicaid Preferred Drug List (PDL) leverages supplemental rebates — additional manufacturer rebates negotiated by the state on top of the national rebate — to favor certain drugs within therapeutic classes.
• Magellan Medicaid Administration provides Georgia Medicaid pharmacy benefit management services, including PDL administration, prior authorization, drug utilization review (DUR), and rebate accounting.
• Georgia Medicaid Drug Utilization Review (DUR) Board reviews prescribing patterns and clinical appropriateness for Medicaid-paid drugs.
• 340B and MDRP coordination is operationally complex for Georgia FQHCs and DSH hospitals — they must manage the duplicate discount prohibition through Medicaid Exclusion File reporting and managed care carve-in/carve-out decisions.

The economics matter especially for senior beneficiaries because:

1. Senior dual-eligibles rely on Medicare Part D for primary drug coverage, but Georgia Medicaid wraps around Part D in important ways.
2. Senior Medicaid-only beneficiaries (not enrolled in Medicare) receive Georgia Medicaid drug coverage with full MDRP rebate flow-through.
3. The PDL determines which drugs in major therapeutic classes (cardiovascular, diabetes, mental health, oncology) are preferred and easier to access.
4. Georgia Medicaid drug coverage decisions are influenced by MDRP rebate economics.
5. State supplemental rebates affect which specific drugs Georgia Medicaid prefers among clinically similar alternatives.

Statutory and regulatory foundation

Section 1927 of the Social Security Act (42 U.S.C. § 1396r-8)

The core statutory text creates the program. It establishes:

• The requirement that manufacturers sign a National Drug Rebate Agreement to have drugs covered by Medicaid.
• The national rebate formulas for brand and generic drugs.
• The definitions of "Average Manufacturer Price" (AMP) and "Best Price."
• Manufacturer reporting requirements (monthly and quarterly).
• State rebate billing and collection mechanisms.
• The interaction with the 340B Drug Pricing Program (duplicate discount prohibition).
• The Inflation Reduction Act-related provisions (Best Price exclusions for negotiated drugs).

Section 4401 of the Omnibus Budget Reconciliation Act of 1990

OBRA-90, Public Law 101-508, was signed November 5, 1990. Section 4401 added Section 1927 to the Social Security Act, creating the Medicaid Drug Rebate Program. The original rebate floor for brand drugs was 15.7% of AMP (later changed to 15.1% in subsequent legislation). OBRA-90 also established the basic structure of state plan amendments for prescription drug coverage.

Deficit Reduction Act of 2005

The Deficit Reduction Act of 2005 (Public Law 109-171) made several refinements to MDRP, including changes to the AMP definition and additional manufacturer reporting requirements. DRA-2005 was litigated extensively, leading to delays in implementation and ultimately to clarifying regulations.

Affordable Care Act Section 2501

Section 2501 of the Patient Protection and Affordable Care Act (Public Law 111-148, March 23, 2010) made two major changes:

1. Increased the brand drug rebate floor from 15.1% AMP to 23.1% AMP (for innovator drugs) — a meaningful increase in state and federal Medicaid drug savings.
2. Extended MDRP to Medicaid managed care drugs — previously, drugs dispensed through Medicaid MCOs did not generate national rebates. After ACA Section 2501, MCO-dispensed drugs are rebate-eligible, with rebates flowing to the state.

The expansion to managed care drugs was particularly significant for states like Georgia where the majority of Medicaid beneficiaries are enrolled in managed care.

Bipartisan Budget Act of 2015

Section 602 of the Bipartisan Budget Act of 2015 (Public Law 114-74) extended the inflation adjustment to generic drugs. Before 2015, only brand drugs were subject to the inflation rebate component. After January 1, 2017, generic drugs are also subject to inflation rebates when AMP rises faster than CPI-U.

This change targeted the well-publicized cases of generic drug price spikes (Daraprim, Albuterol, Epinephrine auto-injectors, etc.) where generic manufacturers had raised prices dramatically without corresponding rebates flowing to Medicaid.

CMS Medicaid Drug Rebate Program Final Rule (February 1, 2016)

CMS published the Medicaid Drug Rebate Program Covered Outpatient Drug Final Rule at 81 FR 5170 on February 1, 2016 — the major implementing regulation for MDRP since DRA-2005. The Final Rule:

• Clarified the AMP definition and excluded sales (e.g., excluded sales to manufacturer-owned 340B-eligible entities under certain conditions).
• Clarified Best Price exclusions (e.g., sales to certain government entities, certain humanitarian programs).
• Set rules for "5i" drugs (inhalation, infusion, injection, instillation, implantation) — drugs not generally dispensed through retail community pharmacies.
• Refined manufacturer reporting requirements.

Inflation Reduction Act of 2022

The Inflation Reduction Act of 2022 (Public Law 117-169) intersects with MDRP through several pathways:

1. Medicare Drug Price Negotiation Program — negotiated maximum fair prices for certain Part D and Part B drugs. The IRA includes specific Best Price exclusions for negotiated drugs to prevent the negotiated price from triggering further Medicaid rebate increases (a "cascade" effect that would otherwise occur).
2. Medicare inflation rebates — IRA created Medicare-specific inflation rebates for drugs in Parts B and D, conceptually parallel to MDRP's inflation rebate.
3. Part D redesign — IRA's Part D out-of-pocket cap and manufacturer discount obligations interact with dual-eligible drug economics.

How the rebate is calculated

Brand drug rebate (innovator/single-source drugs)

For a brand drug, the Unit Rebate Amount (URA) per unit equals:

1. Basic rebate: greater of (a) 23.1% of AMP, or (b) AMP minus Best Price.
2. Plus inflation adjustment: if AMP for the current quarter exceeds (Baseline AMP × CPI-U adjustment factor), the excess is added to the rebate.

The baseline AMP is the AMP for the calendar quarter that includes the drug's first sale. The CPI-U adjustment factor reflects cumulative inflation from baseline to the current quarter.

For some drugs with long market histories and significant price growth, the inflation adjustment is the dominant component of the rebate — often larger than the basic rebate itself.

Total Medicaid rebate per quarter = URA × units dispensed to Medicaid beneficiaries during the quarter.

Generic drug rebate (non-innovator multiple-source drugs)

For a generic drug:

1. Basic rebate: 13% of AMP.
2. Plus inflation adjustment (post-Bipartisan Budget Act of 2015): if AMP exceeds (Baseline AMP × CPI-U adjustment factor), the excess is added.

Generic inflation rebates began in Q1 2017. For pre-2017 generic drugs, the baseline AMP was the Q3 2014 AMP for purposes of computing inflation.

Pediatric/orphan drug exemptions

Certain pediatric formulations and orphan drugs have limited exclusions from the rebate formula. The exclusions are narrow.

"5i" drugs

5i drugs (inhalation, infusion, injection, instillation, implantation) generally are not sold through retail community pharmacies. AMP for 5i drugs is calculated using a modified methodology that captures the specialty distribution channels through which they reach providers.

AMP, Best Price, and URA — definitions

Average Manufacturer Price (AMP)

AMP is the average price paid to the manufacturer by:

• Wholesalers for drugs distributed to retail community pharmacies, and
• Retail community pharmacies that purchase directly from the manufacturer.

AMP excludes:

• Sales to 340B covered entities at the 340B ceiling price (under certain conditions).
• Sales to certain government entities at government pricing.
• Sales to the Indian Health Service.
• Sales to TRICARE retail pharmacy network drugs.
• Customary prompt-pay discounts to wholesalers.

The AMP definition has been a major source of litigation and regulatory complexity since OBRA-90. The 2016 Final Rule clarified many AMP issues.

Best Price

Best Price is the lowest price the manufacturer sold the drug to any single non-excluded purchaser during the quarter (with limited exceptions). Best Price is the key Medicaid "most favored nation" mechanism — Medicaid effectively gets the lowest price the manufacturer offers to anyone (with statutory exceptions).

Best Price excludes:

• Sales to 340B covered entities.
• Sales to certain government entities (Veterans Affairs, Department of Defense, Indian Health Service, Public Health Service, federal supply schedule pricing under certain conditions).
• Sales to the Medicare Part D Coverage Gap Discount Program.
• Sales to certain humanitarian programs and patient assistance programs (if structured to qualify).
• Sales to the Medicare Drug Price Negotiation Program negotiated maximum fair prices (per the IRA).
• Sales at "nominal price" (less than 10% of AMP) to certain entities.

The Best Price exclusions are crucial because they prevent the Medicaid rebate from cascading every time a manufacturer offers a low price to a specific government program or charitable program.

Unit Rebate Amount (URA)

URA is the per-unit dollar amount the manufacturer owes the state Medicaid program for each unit dispensed to a Medicaid beneficiary during the quarter. URA is calculated using the formulas above (basic rebate + inflation adjustment).

CMS publishes quarterly URA data to state Medicaid programs. States bill manufacturers based on the URA and the quantity of units dispensed (or units that should have been dispensed under managed care rebate calculations).

State supplemental rebates

In addition to the national rebate, states may negotiate supplemental rebates with manufacturers. Supplemental rebates are typically negotiated in exchange for preferred status on the state Preferred Drug List (PDL).

The arrangement: a manufacturer agrees to pay an additional supplemental rebate (over and above the national rebate). In exchange, the state lists the drug as "preferred" on the PDL — meaning the drug is available without prior authorization in its therapeutic class, while clinically similar non-preferred drugs require prior authorization.

For Georgia, supplemental rebate negotiations are conducted by the Georgia Department of Community Health (DCH), often through Magellan Medicaid Administration as the pharmacy benefit administrator. The Georgia PDL is updated quarterly to reflect negotiated supplemental rebate decisions.

State supplemental rebates are exempt from Best Price calculations under specific conditions, which is essential — otherwise the supplemental rebate would trigger a cascade lowering the manufacturer's Best Price for Medicaid nationwide.

Medicaid managed care drug rebates (ACA Section 2501)

Before March 23, 2010, drugs dispensed through Medicaid managed care organizations (MCOs) did not generate national rebates. State Medicaid agencies received rebates only on fee-for-service drugs. Since the majority of Medicaid beneficiaries are in managed care in most states, this represented a significant rebate gap.

ACA Section 2501 closed the gap. After March 23, 2010, MCO-dispensed drugs are rebate-eligible. The state collects MCO claims data (typically via the MCO's pharmacy benefit manager), invoices the manufacturer for rebates owed on those drugs, and remits the rebate to the federal share per the Federal Medical Assistance Percentage (FMAP) calculation.

For Georgia Families MCOs (Amerigroup, CareSource, Peach State, WellCare), the state DCH (with Magellan as administrator) collects encounter data on pharmacy claims and invoices manufacturers quarterly for rebates owed on managed care drugs.

340B / MDRP duplicate discount coordination

The 340B Drug Pricing Program statute (Section 340B PHS Act, 42 U.S.C. § 256b) and MDRP both create discount mechanisms for the same drugs. The duplicate discount prohibition exists because a single drug cannot generate both:

1. A 340B ceiling-price discount at acquisition, and
2. A Medicaid rebate after dispensing.

To prevent duplicate discounts, covered entities must identify 340B-purchased drugs dispensed to Medicaid beneficiaries. The mechanisms:

Fee-for-service Medicaid

A covered entity reports 340B drugs dispensed to FFS Medicaid beneficiaries on HRSA's Medicaid Exclusion File (MEF). The state then excludes those claims from its rebate request to the manufacturer.

Medicaid managed care

For managed care, covered entities choose:

• Carve-in: 340B drugs may be dispensed to managed care members. The covered entity (or the state) must communicate which claims used 340B drugs so the state does not invoice the manufacturer for rebates.
• Carve-out: 340B drugs are not used for managed care members; managed care drugs go through normal non-340B inventory. Rebates flow through normally.

Carve-in/carve-out decisions are made at the covered entity level and reported to HRSA. They are operationally significant for Georgia FQHCs and DSH hospitals.

Georgia Medicaid pharmacy program

Department of Community Health (DCH) Pharmacy Services

The Georgia Department of Community Health administers the Georgia Medicaid program, including pharmacy services. DCH:

• Establishes the Georgia Medicaid pharmacy benefit design.
• Maintains the Georgia Medicaid Preferred Drug List (PDL).
• Negotiates state supplemental rebates.
• Coordinates with CMS on national rebate billing and collection.
• Operates the Georgia Medicaid Drug Utilization Review (DUR) Board.

Magellan Medicaid Administration

Magellan Medicaid Administration provides pharmacy benefit administration services for Georgia Medicaid. Magellan operates:

• Point-of-sale claims adjudication for Georgia Medicaid pharmacy claims.
• Prior authorization processing.
• PDL administration.
• Drug Utilization Review.
• Rebate accounting and invoicing.

Georgia Families MCOs

The four Georgia Families Care Management Organizations administer Medicaid managed care for the bulk of Georgia Medicaid beneficiaries:

• Amerigroup Georgia (Anthem/Elevance Health)
• CareSource Georgia
• Peach State Health Plan (Centene)
• WellCare of Georgia (Centene/Wellcare)

Each MCO administers a pharmacy benefit for its members, typically through a contracted pharmacy benefit manager (PBM). MCO drug coverage must align with state policy in most respects, but MCOs can have plan-specific formulary decisions within state guardrails.

Georgia Medicaid Preferred Drug List

The Georgia Medicaid PDL designates "preferred" and "non-preferred" drugs in major therapeutic classes. Preferred drugs are available without prior authorization; non-preferred drugs require PA. The PDL is updated quarterly based on clinical review and supplemental rebate negotiations.

The Georgia DUR Board provides clinical input on PDL placement, prior authorization criteria, and step therapy.

Dual-eligible drug coverage

For seniors who qualify for both Medicare and Medicaid (dual-eligibles), drug coverage is layered:

1. Medicare Part D provides the primary outpatient prescription drug coverage. Dual-eligibles receive automatic full Low-Income Subsidy (LIS) / Extra Help, which covers Part D premiums, deductibles, and cost-sharing.
2. Georgia Medicaid wrap covers limited drugs that Part D does not cover (over-the-counter drugs in some cases, vitamins, certain DESI drugs).
3. Medicare Part B covers drugs administered in physician offices and hospital outpatient settings (chemotherapy, infusions).

For dual-eligibles, MDRP rebates do NOT apply to Part D drugs (Part D has its own manufacturer discount and price negotiation mechanisms, including the Medicare Drug Price Negotiation Program under the IRA).

However, MDRP rebates DO apply to:

• Part B drugs that Medicaid wraps around for cost-sharing (in some Medicare savings programs).
• Medicaid-only drugs not covered by Part D (limited list).

The dual-eligible drug economics are complex and require careful coordination between Medicare Part D plans, state Medicaid, and the manufacturer rebate mechanisms.

Best practices for Georgia stakeholders

1. Beneficiaries: confirm formulary and PDL status before filling. Dual-eligibles should verify Part D plan formularies; Medicaid-only beneficiaries should verify Georgia Medicaid PDL preferred status. Non-preferred drugs require prior authorization.

2. Beneficiaries: enroll in Extra Help / Low-Income Subsidy if eligible. Dual-eligibles are auto-enrolled; near-dual-eligibles should apply through Social Security or Georgia DCH.

3. Providers: prescribe preferred drugs when clinically appropriate. Preferred drug status in Georgia Medicaid reflects supplemental rebate negotiations and clinical equivalence.

4. Providers: complete prior authorization correctly the first time. Magellan administers Georgia Medicaid PA; incomplete PA requests delay patient care.

5. Providers: coordinate dual-eligible drug coverage. Verify Part D plan vs. Medicaid wrap responsibility before dispensing.

6. 340B covered entities: maintain rigorous Medicaid Exclusion File reporting for FFS Medicaid. Failure to report 340B drugs dispensed to FFS Medicaid creates duplicate discount liability.

7. 340B covered entities: make and document carve-in/carve-out decisions for managed care. Adhere consistently to the decision; report to HRSA.

8. Pharmacies: audit Medicaid claims for accuracy. Errors in NDC reporting, day supply, or quantity affect rebate calculations.

9. MCOs: report encounter data accurately and timely. State rebate billing depends on accurate MCO pharmacy encounter data.

10. State: maintain accurate supplemental rebate accounting. Supplemental rebates are confidential and require dedicated accounting separate from national rebates.

11. Provider organizations: monitor PDL changes quarterly. Georgia Medicaid PDL updates affect clinical workflows and patient access.

12. Beneficiaries: use SHIP counselors for Part D plan selection. GeorgiaCares SHIP provides free counseling for Medicare beneficiaries comparing Part D plans.

13. Beneficiaries: leverage manufacturer patient assistance programs. When a drug is non-preferred or non-covered, manufacturer patient assistance programs may help.

14. Caregivers: document medication regimens for care transitions. Hospital discharge and skilled nursing facility transitions are common sources of medication errors and coverage gaps.

Common issues and how to avoid them

1. Prior authorization denials. Non-preferred drugs in Georgia Medicaid PDL require prior authorization. Submitting incomplete PA requests results in denials. Prevention: complete clinical justification carefully.

2. Step therapy requirements. Some Georgia Medicaid drug classes require step therapy (trying preferred drugs first). Prevention: document failed trials of preferred drugs before requesting non-preferred.

3. Dual-eligible coverage confusion. Beneficiaries and pharmacies sometimes confuse Part D and Medicaid drug coverage. Prevention: verify primary coverage before dispensing.

4. Auto-enrollment Part D plan misalignment. CMS auto-enrolls new dual-eligibles in benchmark Part D plans that may not be optimal. Prevention: review and switch Part D plans during enrollment periods.

5. 340B duplicate discount findings. Covered entities can be cited for failing to identify 340B drugs dispensed to Medicaid beneficiaries. Prevention: meticulous MEF reporting and managed care carve management.

6. Manufacturer reporting errors. AMP and Best Price reporting errors trigger rebate disputes. Prevention: rigorous manufacturer compliance processes.

7. NDC reporting errors at the pharmacy. Incorrect NDC reporting affects rebate calculation. Prevention: pharmacy claim accuracy controls.

8. Day supply / quantity errors. Incorrect day supply affects per-unit rebate calculation. Prevention: pharmacy QA processes.

9. MCO encounter data lag. Late MCO encounter data delays state rebate billing. Prevention: MCO reporting compliance.

10. PDL non-preferred status without provider awareness. Providers may not realize a drug has moved from preferred to non-preferred. Prevention: monitor quarterly PDL updates.

11. DESI drug coverage gaps. Certain drugs identified as "less than effective" by FDA's Drug Efficacy Study Implementation (DESI) program are excluded from MDRP rebates and may not be covered by Medicaid. Prevention: avoid DESI drugs when alternatives exist.

12. Off-label prescribing not covered. Medicaid generally covers FDA-approved indications; off-label use may not be covered. Prevention: document medical necessity carefully.

13. Quantity limits. Some Georgia Medicaid drugs have quantity limits per fill. Prevention: review limits and request override when clinically necessary.

14. IRA negotiated drug interactions. As Medicare Drug Price Negotiation Program drugs reach effective dates (2026 for first 10 drugs), pharmacy systems must accommodate Maximum Fair Prices for Part D claims, with downstream rebate accounting implications.

Worked examples

Example 1: Fulton County — 70-year-old Atlanta dual-eligible Medicaid wrap brand drug

Mr. Williams is 70 and lives in Atlanta. He is dual-eligible for Medicare and Georgia Medicaid. His primary care physician prescribes a brand-name DPP-4 inhibitor for type 2 diabetes management.

Mr. Williams's Medicare Part D plan (he is enrolled in a benchmark plan and receives Extra Help) covers the DPP-4 inhibitor. Medicaid does not pay for the Part D-covered drug — Part D is primary. However, the manufacturer's MDRP rebate obligation flows through the Part D pricing structure differently than fee-for-service Medicaid.

For Part D drugs, the IRA Manufacturer Discount Program (post-Inflation Reduction Act) applies in the initial coverage phase. The manufacturer's MDRP Medicaid rebate continues to apply for any units dispensed to Medicaid beneficiaries through state Medicaid (not Part D), but for Mr. Williams's Part D-covered drug, MDRP rebates do not apply.

Example 2: DeKalb County — 75-year-old DeKalb Medicaid-only senior preferred generic

Mrs. Johnson is 75, has limited income, and is Medicaid-only (not enrolled in Medicare because she has not paid into Social Security for the required quarters). She receives Georgia Medicaid coverage including prescription drug coverage.

Her primary care provider prescribes a preferred generic statin for hyperlipidemia management. The Georgia Medicaid PDL lists the generic statin as preferred — no prior authorization is required. The pharmacy fills the prescription, submits the claim to Georgia Medicaid (through Magellan), and Georgia Medicaid pays the pharmacy.

Subsequently, Georgia DCH (through Magellan) invoices the generic manufacturer for the 13% AMP rebate + any inflation adjustment owed under MDRP. The rebate is collected quarterly and remitted to the federal Medicaid share per FMAP. Mrs. Johnson never sees any of this — she just sees that her statin is covered and easily refillable.

Example 3: Cobb County — 68-year-old Cobb dual-eligible Medicare Part D + Medicaid wrap interaction

Mrs. Rodriguez is 68 and dual-eligible. She receives Medicare Part D drug coverage and Georgia Medicaid wrap. She has multiple chronic conditions and takes 8 medications.

For most of her medications, Part D is primary and pays. For two over-the-counter drugs (omeprazole 20 mg and loratadine) that her Part D plan doesn't cover but her clinical team includes in her regimen, Georgia Medicaid wraps — Medicaid pays for the OTC drugs at her local pharmacy, and Magellan adjudicates the claim. The MDRP rebate applies to the Medicaid-paid claims (not the Part D-paid claims).

Mrs. Rodriguez also receives quarterly leuprolide injections (Part B drug) in her endocrinologist's office. The leuprolide is paid under Medicare Part B. MDRP does not apply to physician-administered Part B drugs in the same way it applies to outpatient pharmacy claims — Part B drugs have their own pricing methodology (ASP + 6% for separately payable drugs).

Example 4: Worth County — 72-year-old rural Worth County Medicaid pharmacy access

Mr. Davis is 72 and lives in Worth County in rural southwest Georgia. He is Medicaid-only and visits Phoebe Putney Memorial Hospital's affiliated primary care clinic. His clinician prescribes a brand-name SGLT2 inhibitor for diabetes — a drug that is non-preferred on the Georgia Medicaid PDL.

The pharmacy fills the prescription only after Magellan's prior authorization process is completed. The PA requires documentation that Mr. Davis has failed alternative preferred therapies (typically metformin and a preferred sulfonylurea or DPP-4 inhibitor). The clinician submits the PA with documentation; Magellan approves; the pharmacy dispenses.

Georgia Medicaid pays the pharmacy. Then DCH (through Magellan) invoices the manufacturer for the MDRP rebate: greater of 23.1% AMP or AMP minus Best Price, plus inflation adjustment. For a brand SGLT2 inhibitor with significant inflation since launch, the inflation adjustment may be the dominant component.

Example 5: Bibb County — 80-year-old Bibb Medicaid managed care drug rebate (Amerigroup)

Mrs. Thompson is 80, lives in Macon, and is dual-eligible. She is enrolled in Amerigroup Georgia for her Medicaid managed care benefits and a Medicare Advantage / Dual-Eligible Special Needs Plan (D-SNP) for her Medicare benefits.

Most of her drug coverage flows through Part D (within her D-SNP). For a small number of Medicaid-wrap drugs (certain OTC drugs and vitamins), the claim goes through Amerigroup Georgia's Medicaid pharmacy benefit (administered through Amerigroup's PBM).

After the dispense, Amerigroup reports the encounter to Georgia DCH. Georgia DCH (through Magellan) bills the manufacturer for the MDRP rebate on the MCO-paid drug. The rebate flows back to the state and federal Medicaid share. Mrs. Thompson is unaffected by this back-office economics; her pharmacy interaction is the same as any other dual-eligible.

Example 6: Hall County — 67-year-old Hall County dual-eligible specialty drug rebate

Mr. Patel is 67, lives in Gainesville, and is dual-eligible. He has chronic kidney disease and his nephrologist prescribes a brand-name specialty oral medication for anemia management — a relatively new drug with significant inflation since its 2019 launch.

The drug is covered under Mr. Patel's Part D plan (he is enrolled in a Medicare Advantage D-SNP). The pharmacy bills Part D, not Medicaid. MDRP rebates do not apply to the Part D claim.

However, the same manufacturer's drug, when dispensed to a Medicaid-only beneficiary, generates a substantial MDRP rebate — the brand basic rebate (greater of 23.1% AMP or AMP minus Best Price) plus the inflation adjustment for the post-2019 price growth. For Medicaid-only patients, the effective net cost can be substantially below list price.

For Mr. Patel personally, the Extra Help / LIS coverage means his out-of-pocket cost is minimal. The MDRP economics determine the manufacturer's net revenue from Medicaid-only patients receiving the drug elsewhere.

Frequently Asked Questions

1. What is the Medicaid Drug Rebate Program? A federal-state program (Section 1927 of the Social Security Act, 42 U.S.C. § 1396r-8) under which drug manufacturers must pay quarterly rebates to state Medicaid programs in exchange for Medicaid coverage of their drugs.

2. When was the Medicaid Drug Rebate Program created? Section 4401 of the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), signed November 5, 1990, added Section 1927 to the Social Security Act.

3. Who administers MDRP? The Centers for Medicare & Medicaid Services (CMS), specifically the Medicaid Drug Programs group within the Center for Medicaid and CHIP Services.

4. What is the brand drug rebate formula? Greater of (a) 23.1% of Average Manufacturer Price (AMP), or (b) AMP minus Best Price — plus an inflation adjustment when AMP has risen faster than CPI-U.

5. What is the generic drug rebate formula? 13% of AMP, plus an inflation adjustment (added by the Bipartisan Budget Act of 2015, effective Q1 2017).

6. What is AMP? Average Manufacturer Price — the average price paid to the manufacturer by wholesalers for retail community pharmacy distribution and by retail community pharmacies purchasing directly.

7. What is Best Price? The lowest price the manufacturer sold the drug to any single non-excluded purchaser during the quarter. Best Price is Medicaid's "most favored nation" mechanism.

8. Does Best Price include 340B sales? No. 340B sales are excluded from Best Price (and from AMP under certain conditions).

9. Does Best Price include Medicare Part D rebates? No. Medicare Part D Coverage Gap Discount Program prices are excluded.

10. Does Best Price include IRA-negotiated prices? No. The IRA includes specific Best Price exclusions for negotiated maximum fair prices.

11. How does MDRP interact with 340B? A drug cannot generate both a 340B ceiling-price discount and a Medicaid rebate. Covered entities must identify 340B drugs dispensed to Medicaid beneficiaries through the Medicaid Exclusion File (FFS) and carve-in/carve-out decisions (managed care).

12. Are Medicaid managed care drugs rebate-eligible? Yes, since ACA Section 2501 took effect March 23, 2010. MCO-dispensed drugs generate national rebates flowing to the state.

13. What is a state supplemental rebate? An additional rebate negotiated between the state and a manufacturer, typically in exchange for preferred drug list status. Georgia DCH negotiates supplemental rebates.

14. What is Georgia's Medicaid Preferred Drug List? A list of "preferred" drugs in major therapeutic classes that are available without prior authorization. Non-preferred drugs require PA.

15. Who administers Georgia's Medicaid pharmacy benefit? The Georgia Department of Community Health (DCH) with Magellan Medicaid Administration as the pharmacy benefit administrator. Georgia Families MCOs administer pharmacy benefits for managed care members.

16. Do MDRP rebates affect what I pay for my prescriptions? Not directly. Rebates are paid by manufacturers to state Medicaid programs after the prescription is dispensed. Beneficiaries pay their normal Medicaid copay or no copay.

17. Are dual-eligible drugs covered under MDRP? Mostly no. Dual-eligibles receive Medicare Part D as primary drug coverage, and Part D has its own pricing mechanisms. Medicaid wraps for limited drugs (OTC, certain DESI exclusions), and those Medicaid-paid drugs are MDRP rebate-eligible.

18. What is the Inflation Reduction Act's effect on MDRP? The IRA creates Medicare-specific drug price negotiation and Medicare inflation rebates. It also creates Best Price exclusions for IRA-negotiated drugs so the negotiated price does not cascade through Medicaid.

19. What happens if a manufacturer doesn't sign a National Drug Rebate Agreement? The manufacturer's drugs are not covered by Medicaid. Effectively, all manufacturers sign because Medicaid is too large to forgo.

20. How often are rebates paid? Quarterly. State Medicaid programs invoice manufacturers based on the quarterly URA and the drug units dispensed during the quarter.

21. What is the DUR Board? The Georgia Medicaid Drug Utilization Review Board reviews prescribing patterns, clinical appropriateness, and provides input on PDL placement.

22. Can a beneficiary appeal a Georgia Medicaid drug coverage denial? Yes. Georgia Medicaid offers an appeals process through DCH. SHIP and legal aid can help navigate appeals.

23. What is the inflation adjustment in the rebate formula? An additional rebate amount triggered when a drug's AMP rises faster than the Consumer Price Index for All Urban Consumers (CPI-U) since the drug's launch date.

24. Are over-the-counter drugs covered by Georgia Medicaid? Some OTC drugs are covered (proton pump inhibitors at OTC strength, antihistamines, etc.). Coverage varies. Verify before dispensing.

25. Where do I learn more? Georgia DCH Pharmacy Services (1-866-525-5826), Magellan Medicaid Administration (1-800-424-9760), CMS Medicaid Drug Programs (410-786-3000), and the Georgia Medicaid Provider Manual.

Call to action — Georgia Medicaid pharmacy resources

If you, a family member, or someone you care for relies on Georgia Medicaid or Medicaid-Medicare dual-eligible drug coverage, the contacts below can help with formulary questions, prior authorization issues, dual-eligible coordination, and pharmacy access concerns.

• Medicare: 1-800-MEDICARE (1-800-633-4227)
• Georgia DCH Member Services: 1-866-211-0950
• Georgia Medicaid Pharmacy Services: 1-866-525-5826
• Magellan Medicaid Administration Georgia: 1-800-424-9760
• Amerigroup Georgia: 1-800-600-4441
• CareSource Georgia: 1-855-202-1058
• Peach State Health Plan: 1-800-704-1484
• WellCare of Georgia: 1-866-231-1821
• CMS Medicaid Drug Programs: 410-786-3000
• Palmetto GBA (Georgia Medicare Administrative Contractor): 1-866-238-9650
• GeorgiaCares (Georgia SHIP): 1-866-552-4464
• Medicare Rights Center: 1-800-333-4114
• Atlanta Legal Aid: 404-377-0701
• Georgia Legal Services Program: 1-800-498-9469
• Eldercare Locator: 1-800-677-1116
• Social Security Administration: 1-800-772-1213
• NeedyMeds: 1-800-503-6897
• Patient Advocate Foundation: 1-800-532-5274