The Medicaid Drug Rebate Program is a partnership between the Centers for Medicare & Medicaid Services (CMS), state Medicaid agencies, and participating drug manufacturers working together to offset the federal and state costs of outpatient prescription drugs dispensed to Medicaid patients. Approximately 600 manufacturers currently participate in this program.

HHSC receives federal funds for prescription claims on drugs made by manufacturers participating in the Medicaid Drug Rebate program. Manufacturers agree to pay rebates according to their state and federal contracts in return for having drugs covered by Medicaid.