Medicaid: almost one-third of states favor brand over generic

Clinical takeaway: Brand-preferred Medicaid lists exist in 15 states and differ from one to the next, so confirm the list in your state before assuming the generic is preferred. 

Manufacturers owe state Medicaid programs rebates in exchange for guaranteed formulary placement. For brand drugs, those rebates grow when prices climb faster than inflation. By the time a generic arrives, the rebate can leave the brand cheaper for the state than the generic. 

Because the rebate amounts are confidential, outsiders can't see which drugs that applies to. A cross-sectional comparison of state formularies and dispensing looks at whether brand preferences track what gets reimbursed. 

Where a state preferred the brand, Medicaid mostly reimbursed the brand. Across 115 drugs that two or more states designated, brand-name versions made up a median 67.6% of reimbursed units in states with the designation, against 0% in states that designated other drugs but not that one. 

Managed care plans followed the lists far less than fee-for-service Medicaid did: among designated drugs, brand-name versions made up a median 25.6% of managed care reimbursement and 88.3% of fee-for-service. Fifteen of 51 programs published designations, and they often diverged: more than half of the 294 designated drugs appeared in only one state. 

Researchers compiled publicly posted state Medicaid formularies as of January 2023 and matched drugs designated by at least two states to 2023 Medicaid State Drug Utilization Data. The 15 states that published designations were Alabama, Arizona, Arkansas, Colorado, Connecticut, Iowa, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio, Oklahoma, Utah, and Wyoming. Authorized generics did not count as brand use. Rebates are confidential, so the researchers assumed that any drug designated by two or more states was highly rebated, and states that favor brands without saying so publicly would not appear in the count. 

Managed care plans lack a reason to weigh rebates in formulary decisions, because rebates are paid directly to states. Some states have started carving drugs out of managed care contracts or creating unified formularies in response. 

The authors argue that CMS, which calculates the rebates, could support states by identifying eligible drugs. The authors note that states have substantial room to lower drug spending through more consistent brand-preferred designations and strategies to make managed care plans comply. 

Source: Gabriele SME, et al. (2026 Nov 6) JAMA Health Forum. State Medicaid programs' formulary preference for brand-name over generic drugs