Managing the Medicaid prescription drug profit and pharmacy expenditures is a long-standing coverage precedence for state Medicaid packages. Prescribed drugs account for about 6% of complete Medicaid spending, and Medicaid gross and internet spending on prescribed drugs continues to rise, partly because of the emergence of latest, excessive price medication, together with anti-obesity drugs and cell and gene therapies that deal with, and typically remedy, uncommon illnesses. Below the federal Medicaid Drug Rebate Program (MDRP), states should cowl almost all FDA-approved medication from rebating producers, however most states are within the means of implementing varied price containment initiatives to fight rising pharmacy prices resembling value-based buying preparations and pharmacy profit supervisor (PBM) reforms. There have additionally been varied federal actions to handle excessive prescription drug prices lately, together with the passage of the Inflation Discount Act, the lifting of the rebate cap, and a not too long ago finalized federal rule geared toward strengthening the MDRP.
On the identical time, the COVID-19 pandemic and the pandemic-related steady enrollment provision considerably affected Medicaid enrollment and spending developments in addition to Medicaid prescription drug developments and can proceed to influence developments as states wrap up the unwinding of the continual enrollment provision. The result of the election may even have main implications for the way forward for Medicaid, together with Medicaid prescription drug spending and entry given the Trump Administration and Biden-Harris Administration diverging information on the subject. This difficulty temporary describes current developments within the variety of Medicaid outpatient prescriptions and the spending on these medication and examines how the pandemic and pandemic-era insurance policies might have impacted these developments. Key findings embody:
The variety of Medicaid prescriptions annually was on the decline till FY 2020 when the development reversed; nevertheless, the variety of prescriptions solely elevated by 3% total from FY 2017 to FY 2023 and the variety of prescriptions per enrollee declined.
On the identical time, internet spending (spending after rebates) on Medicaid prescribed drugs is estimated to have elevated by 72%, from $30 billion in FY 2017 to $51 billion in FY 2023, seemingly pushed by the emergence of latest high-cost specialty medication.
Rebates cut back Medicaid spending on prescribed drugs by over half, however the lower is bigger for fee-for-service (FFS) drug spending.
What are current developments within the variety of Medicaid prescriptions?
The variety of prescriptions paid for by Medicaid annually was on the decline till FY 2020 when the development reversed; nevertheless, the variety of prescriptions solely barely elevated total from FY 2017 to FY 2023 and the variety of prescriptions per enrollee declined (Determine 1). After declining from FY 2017 to FY 2020, the variety of Medicaid prescriptions elevated by 11% from FY 2020 to 2023 doubtlessly reflecting enrollment progress throughout the steady enrollment interval. Nevertheless, Medicaid prescriptions remained under FY 2017 ranges till FY 2023, with the full variety of prescriptions solely growing by 3% total from FY 2017 to FY 2023. On the identical time, the variety of Medicaid prescriptions per individual has declined by over 2 prescriptions per individual since FY 2017. This might level to decrease drug utilization throughout the steady enrollment provision or will increase within the variety of days equipped per prescription (this evaluation doesn’t account for days provide, see Strategies for extra info). When the pandemic hit, many states relaxed their 30-day drug meting out limits, which allowed for extra 90-day prescriptions and sure contributed to developments seen right here.
What are current developments in Medicaid prescription drug spending?
Web spending (spending after rebates) on Medicaid prescribed drugs is estimated to have grown considerably lately, growing from $30 billion in FY 2017 to $51 billion in FY 2023, a 72% enhance (Determine 2). Since FY 2017, gross Medicaid spending (spending earlier than rebates) on Medicaid outpatient prescribed drugs has grown by 62%. The distinction between internet and gross spending is drug rebates. Below the MDRP, drug producers present rebates to the federal authorities and states in change for Medicaid protection of their medication, and a Congressional Price range Workplace examine discovered these rebates end in decrease internet drug costs in Medicaid in contrast with different federal packages. Development in rebates on Medicaid prescribed drugs was slower than gross spending progress over the interval, with rebates growing 54% from FY 2017 to FY 2023. The emergence of latest high-cost specialty medication, together with new cell and gene therapies, is probably going a key driver in spending will increase, and research present launch costs for brand new medication have elevated. Research have additionally discovered substantial drug worth will increase past the speed of inflation lately. General, internet Medicaid spending per prescription elevated from $39 in FY 2017 to $65 in FY 2023, although current adjustments within the variety of days a prescription is equipped for may be contributing to will increase. General, internet Medicaid spending on prescribed drugs accounted for an estimated 6% of complete Medicaid profit spending in FY 2023, solely a small enhance from FY 2017 (5.2%).
Rebates cut back Medicaid spending on prescribed drugs by over half, however the lower is bigger for fee-for-service (FFS) drug spending (Determine 3). Over the interval, the share of gross spending rebates accounted for has additionally declined barely from 54% in FY 2017 to 51% in FY 2023 (Determine 2). In 2023, drug rebates comprised 61% of gross FFS spending however solely 44% of gross managed care group (MCO) spending. There are a number of potential causes for that distinction:
One examine discovered the construction of the rebate program might incentivize using generic or decrease priced medication in MCOs since MCOs don’t obtain statutory rebates. States do obtain a portion of statutory rebates (that are usually increased for model medication), so there could also be muted incentive to shift to generics in FFS.
Some states additionally carve out particular medication or drug courses from managed care, usually focusing on high-cost, model medication (which have increased rebates).
Whereas capitated managed care is now the predominant supply system for Medicaid in most states, managed care penetration charges for various eligibility teams can fluctuate by state. Adults ages 65+ and folks eligible by means of incapacity are much less more likely to be enrolled in MCOs and should require extra specialty model drugs which usually have increased rebates.
This evaluation doesn’t embody any supplemental rebates that could be negotiated between managed care plans and producers, however does embody supplemental rebates negotiated between state Medicaid companies and producers.
Strategies
Variety of Prescriptions and Gross Spending Knowledge: This evaluation makes use of 2016 by means of 2023 State Drug Utilization Knowledge (SDUD) (downloaded in September 2024) transformed to federal fiscal yr (FY) 2017 by means of FY 2023. The SDUD is publicly accessible knowledge supplied as a part of the Medicaid Drug Rebate Program (MDRP), and offers info on the variety of prescriptions, Medicaid spending earlier than rebates, and cost-sharing for rebate-eligible Medicaid outpatient medication by NDC, quarter, managed care or fee-for-service, and state. It additionally offers this knowledge summarized for the entire nation. The information don’t embody info on the variety of days equipped in every prescription. CMS has suppressed SDUD cells with fewer than 11 prescriptions, citing the Federal Privateness Act and the HIPAA Privateness Rule. This evaluation used the nationwide totals knowledge as a result of much less knowledge is suppressed on the nationwide versus state degree.
Rebate Knowledge: This evaluation makes use of CMS-64 Monetary Administration Studies (FMR) for FY 2017 by means of FY 2023 (downloaded in August 2023). These reviews embody complete Medicaid expenditures damaged out by varied service classes, and this evaluation pulls out the drug rebate line gadgets, separating them by managed care or fee-for-service rebates. The rebate knowledge used consists of statutory rebates, state supplemental rebates, rebates beneath the ACA offset, rebates from VBAs, and rebates for opioid use dysfunction treatment assisted remedy. Supplemental rebate agreements negotiated between Medicaid managed care plans and producers are usually not included. The rebates collected within the CMS-64 had been subtracted from the gross spending totals from the SDUD to estimate internet Medicaid spending on prescribed drugs every fiscal yr.
Limitations: There are a selection of limitations to the estimates of Medicaid prescriptions and spending discovered on this evaluation, together with:
This evaluation examines the variety of Medicaid prescriptions within the knowledge and doesn’t alter for days equipped by every prescription. A rise in prescription lengths, particularly throughout the pandemic, may contribute to fewer prescriptions.
The SDUD are up to date quarterly; a brand new quarter of information is usually launched, and the prior 5 years of information are additionally up to date. This implies utilization and gross spending totals can fluctuate relying on when the information is downloaded, and totals might not match different exterior sources or prior KFF evaluation because of this.
The spending collected on the CMS-64 and reported within the FMR knowledge makes use of a cash-basis of accounting, which means expenditures are primarily based on the date of cost not notably when the service occurred. In apply, states have two years following the date a service was rendered to report their spending. There could also be timing variations inflicting misalignment between the prescriptions paid for by Medicaid within the SDUD and the rebates reported within the CMS-64.
Though states can accumulate drug rebates on physician-administered outpatient medication that aren’t billed as a bundled service, physician-administered medication topic to a rebate can fluctuate from state to state. As a result of specialty medication are sometimes physician-administered, it’s potential that the information displays decrease Medicaid spending and utilization of sure medication of this type.
Spending knowledge shouldn’t be adjusted for inflation.
