This report conveys extensive Medicaid prescription drug data, focused on key expenditure trends over the past several years and key dynamics related to Medicaid’s prescription drug benefit. The five most significant findings are described below.
1) The proportion of Medicaid prescriptions paid by Medicaid managed care organizations (MCOs) has grown dramatically. During federal fiscal year (FFY) 2011, 22.4 percent of Medicaid-paid prescriptions were paid by MCOs. As of 2017, this percentage had risen to 71.9 percent. The 2017 percentage of Medicaid prescriptions paid by MCOs varies widely by state, ranging from 99.8 percent in Hawaii to zero in 13 states. This report quantifies the proportion of Medicaid prescriptions, pre-rebate expenditures, and post-rebate expenditures paid by MCOs in each year in each state. In 2017, MCOs paid for more than 90 percent of Medicaid prescriptions in 16 states.
2) High-cost medications represent a rapidly increasing proportion of Medicaid prescription drug spending. Prescription drugs with an average pre-rebate cost of $1,000 or more comprised 19.0 percent of all Medicaid pre-rebate spending during 2011. This rose to 43.9 percent by 2017. This report shows the distribution of Medicaid prescriptions and pre-rebate expenditures by cost per prescription corridor by year, both including and excluding the curative hepatitis C medications. Excluding these hepatitis C drugs, medications costing $1,000 or more per prescription still comprised 41.8 percent of all Medicaid pre-rebate prescription drug expenditures during 2017.
3) MCOs’ prescription drug benefit management efforts yield large-scale savings. The average net (post-rebate) cost per MCO-paid Medicaid prescription during 2017 was $37, only 73 percent of the average net cost of Medicaid prescriptions paid in the fee-for-service (FFS) setting during 2016, which was $50. In 2017, generic drugs represented 88.1 percent of MCO-paid Medicaid prescriptions versus 83.7 percent in the FFS setting.
4) Due primarily to provisions of the Affordable Care Act (ACA), the Medicaid managed care program receives large prescription drug rebates. On a national level, these rebates comprise approximately half of initial Medicaid payments to pharmacies—51 percent in 2017. Medicaid prescription drug spending is therefore typically best assessed on a post-rebate basis. Pre-rebate prescription drug cost spending comprised 8.0 percent of all Medicaid expenditures in 2011 and 9.6 percent in 2016. Post-rebate prescription drug cost spending comprised 4.3 percent of all Medicaid expenditures in 2011 and 4.7 percent in 2016.
5) We also analyzed financial statements of Medicaid MCOs to assess the proportion of their premium revenues comprising prescription drug costs. Prescription drug expenditures represented 15.6 percent of Medicaid MCOs’ premium revenues during calendar year (CY) 2015 and 16.1% during CY2016.View the full article »