For millions of low-income Americans, getting medicine shouldn’t mean choosing between rent and refills. That’s where Medicaid and generic drugs come in - a powerful combo that keeps people healthy without breaking the bank. In 2023, over 90% of all prescriptions filled through Medicaid were for generic medications. And yet, those same generics made up less than 18% of total Medicaid drug spending. That’s not a coincidence. It’s the result of smart policy, fierce competition, and real savings passed directly to patients.
Why Generics Are the Backbone of Medicaid
Generic drugs are exact copies of brand-name medicines, approved by the FDA to work the same way, with the same active ingredients, dosage, and safety profile. The only difference? Price. A generic version of a drug like lisinopril (used for high blood pressure) can cost 95% less than the brand-name version. For someone on Medicaid, that means a $6 copay instead of $56. In 2022 and 2023, the average copay for a generic prescription under Medicaid was $6.16. For brand-name drugs? $56.12. That’s nearly nine times more. And because Medicaid covers so many people with limited income, this difference isn’t just a number - it’s what keeps someone from skipping their pills. The reason generics dominate Medicaid prescriptions isn’t accidental. States actively encourage pharmacies to substitute generics whenever possible. Unless a doctor specifically says a brand is medically necessary, the pharmacist will automatically give the generic. It’s built into the system. And it works: 93% of generic prescriptions cost less than $20 at the pharmacy counter. For brand-name drugs, only 59% fall below that threshold.How Medicaid Gets Such Low Prices
Medicaid doesn’t just rely on competition between generic manufacturers - it has a legal tool that forces drugmakers to lower prices even further: the Medicaid Drug Rebate Program (MDRP). Created in 1990, this program requires drug companies to pay rebates to state Medicaid programs in exchange for having their drugs covered. For non-specialty generic drugs, Medicaid gets an average rebate of 86% of the retail price. That means if a generic drug retails for $10, Medicaid pays only $1.40 after the rebate. In fiscal year 2023, these rebates saved the program $53.7 billion - cutting gross spending by over half. That’s more than the entire annual budget of many U.S. states. Even compared to other government programs, Medicaid gets the best prices. A 2021 Congressional Budget Office study found that Medicaid’s net prices - after rebates - were lower than those of the Department of Veterans Affairs, Medicare Part D, and private insurers. For brand-name drugs, Medicaid’s average rebate was 77% of the retail price. For specialty drugs, it was 60%. No other federal program comes close.The Real Impact on Patients
The savings aren’t just on paper. They change lives. A person with diabetes who needs metformin can afford to take it every day because their copay is $3. Someone with asthma can refill their inhaler without choosing between groceries and medicine. Studies show that when out-of-pocket costs drop, people take their meds as prescribed. That means fewer hospital visits, fewer ER trips, and better long-term health. From 2009 to 2019, generic drugs saved the U.S. healthcare system an estimated $2.2 trillion. In 2022 alone, generics and biosimilars saved $408 billion - the highest on record. That’s money that stays in people’s pockets and helps families pay for food, housing, and transportation. But here’s the catch: not all savings make it to the patient. In Ohio, a 2025 audit found that Pharmacy Benefit Managers (PBMs) - middlemen who handle drug claims - took fees equal to 31% of the cost of $208 million in generic drugs in just one year. That’s $64 million in fees on drugs meant to be cheap. These fees don’t always reduce patient copays. In some cases, they’re hidden behind complex pricing structures that leave patients paying more than they should, even when the drug’s wholesale price drops.
Where the System Still Falls Short
Despite the success of generics, there are big challenges. The biggest? High-cost specialty drugs. Even though they make up less than 2% of all Medicaid prescriptions, they account for more than half of total drug spending. A single dose of some new biologic drugs can cost over $1,000. That’s why Medicaid net spending jumped from $30 billion in 2017 to $60 billion in 2024 - even as generic use stayed steady at 90%+. Another problem: delays. When a new generic enters the market, it can take months - sometimes over a year - for Medicaid formularies to update. During that time, patients might still be stuck paying higher prices for the brand-name version. Some states also require prior authorization for even common generics, which can delay treatment for weeks. One Medicaid user on Reddit shared that her daughter’s asthma inhaler switched to a generic, dropping her copay from $25 to $3 - but getting approval took three weeks and five phone calls. And while Medicaid covers all medically necessary drugs by law, not every state makes it easy to access them. Forty-eight states use managed care organizations to deliver pharmacy benefits, each with different rules. What’s covered in California might need prior auth in Texas. Patients have to learn their state’s system - and many don’t know where to start.What’s Being Done to Fix It
In 2024, the Centers for Medicare & Medicaid Services (CMS) launched the GENEROUS Model - a new program aimed at reducing drug spending through smarter formulary design and better use of generics. It’s focused on cutting waste, reducing administrative burdens, and pushing for faster adoption of new generics. There’s also hope from the Inflation Reduction Act. While it currently only allows Medicare to negotiate drug prices, experts believe extending that power to Medicaid could save $15-20 billion over ten years. And as more biologic drugs lose patent protection, biosimilars - cheaper versions of complex biologic medicines - are expected to save Medicaid another $100 billion annually by 2027. But real progress means fixing the middlemen. If PBMs are taking 30% of the savings from generic drugs, then patients aren’t seeing the full benefit. Some states are starting to require PBMs to pass savings directly to consumers. Others are exploring state-run pharmacy networks that cut out the middleman entirely.
What Low-Income Patients Can Do
You don’t need to be an expert to use Medicaid’s generic drug system. Here’s what actually helps:- Always ask your pharmacist: “Is there a generic version?” Even if you’re not sure, they’ll know.
- Check your state’s Medicaid formulary online. Most have searchable lists of covered drugs and their tiers.
- If a generic is denied, appeal. You have the right to request a coverage exception.
- Know your copay. If it’s higher than $10 for a common generic, ask why. It might be a PBM issue, not a Medicaid rule.
- Use mail-order pharmacies if available. Many offer 90-day supplies at lower copays.
The Bigger Picture
Medicaid isn’t perfect. But for low-income patients, it’s often the only thing standing between them and untreated illness. Generics are the quiet hero of that system - affordable, effective, and widely available. They’re why a single mother can manage her hypertension, why a teen with ADHD can focus in school, and why an elderly man can avoid a stroke. The real threat isn’t that generics are too expensive. It’s that rising specialty drug costs and opaque PBM fees could slowly erode the savings we’ve built over decades. Protecting Medicaid’s generic drug program isn’t just about saving money. It’s about protecting access to basic health care for millions of people who have no other option.Are generic drugs as safe and effective as brand-name drugs?
Yes. The FDA requires generic drugs to have the same active ingredients, strength, dosage form, and route of administration as the brand-name version. They must also meet the same strict standards for quality, purity, and performance. Generics are tested to ensure they work the same way in the body. Over 90% of prescriptions filled in the U.S. are generics - and they’ve been safely used for decades.
Why do I sometimes pay more for a generic than I expected?
Your copay isn’t always tied directly to the drug’s actual cost. Pharmacy Benefit Managers (PBMs) often set copay tiers that don’t reflect real price changes. Even if the wholesale price of a generic drops, your copay might stay the same - or even go up - because PBMs keep the difference. If your copay seems high for a common generic, ask your pharmacy or Medicaid office to check if it’s being priced correctly.
Does Medicaid cover all generic drugs?
Medicaid must cover all medically necessary drugs, but each state decides which ones go on its formulary (list of covered drugs). Most common generics are covered, but some newer or less-used ones may require prior authorization. If your doctor prescribes a drug that’s not on the list, you can request an exception. Many states approve these requests if the drug is medically necessary.
Can I get generics through mail-order pharmacies?
Yes. Most Medicaid managed care plans offer mail-order pharmacy services, often for 90-day supplies. These usually come with lower copays than in-store pickups. For example, a 30-day supply might cost $6, but a 90-day supply through mail order might be $12 - saving you money and reducing trips to the pharmacy.
Why are some generic drugs hard to find at my pharmacy?
Sometimes it’s a supply issue - manufacturers can’t produce enough to meet demand. Other times, the pharmacy doesn’t stock it because the rebate is too low to make it worth their time. If your pharmacy doesn’t have your generic, ask them to order it. Most can get it within 24-48 hours. You can also try a different pharmacy - some Medicaid plans let you switch to one that carries your medication.
