The Medicaid Drug Rebate Program is administered by the Centers for Medicare & Medicaid Services' Center for Medicaid and State Operations (CMSO).
The Medicaid Drug Rebate Program requires a drug manufacturer to enter into and have in effect a national rebate agreement with the U.S. Department of Health and Human Services (HHS). In doing this, states receive Federal funding for outpatient drugs dispensed to Medicaid patients.
In addition, drug manufacturers are also required to enter into various agreements with the U.S. Department of Veterans Affairs. A drug manufacturer must sign an agreement with these two federal Departments in order to have its drugs covered by Medicaid.
Approximately 550 pharmaceutical companies currently participate in this program. Forty nine states, (Arizona is excluded), and the District of Columbia cover drugs under the Medicaid Drug Rebate Program.