Pharmaceutical reimbursement and drug cost control: the MAC experience in Maryland

Abstract

The Maximum Allowable Cost (MAC) program was mandated by the federal government in 1976 in an effort to curb drug expenditures under Medicare and Medicaid by limiting reimbursements for prescription products dispensed to program beneficiaries. MAC performance is usually evaluated in terms of state compliance with federal guidelines. The present study broadens this approach to include other sources of variation in program effectiveness across states. In the case of Maryland, the MAC program offers encouraging signs of at least limited success in curbing Medicaid drug expenditures. The results of the study show a significant, but short-lived, decline in spending levels, suggesting the possibility of program-induced increases in wholesale prices or dispensing fees over time.