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Medicaid Pharmacy Trends

By October 27, 2011Commentary

For most states Medicaid spending is the highest or one of the highest categories of spending.  With enrollments growing after the recession and slated for enormous expansion when the reform law provisions kick in in 2014, states are desperate to identify cost-control strategies.  Many have increased their use of managed-care plans.  While drug spending has generally not been the highest growth area in Medicaid spending, it is large enough to warrant special attention and there is a perception that more dollars can be wrung out of prescription drug use and costs.  A Kaiser Family Foundation report surveys the various state efforts in this regard.  (KFF Report)

The report is a survey of actions and trends in regard to pharmacy benefit management across the states.  Pharmacy spending was $25 billion by all states for Medicaid in 2009, but manufacturer rebates mandated by the federal government and states lowered that spending by almost $9 billion.  While there has been a huge upswing in generic use, the rapidly emerging growth of specialty pharmaceuticals will pose a challenge for the Medicaid programs, as it does for all payers.  Because of AWP litigation, the states are looking at new reimbursement methods for brand-name drugs, which while less than 30% of prescriptions, account for 80% of ingredient cost.  Several states, with the help of a federal data gathering program, are looking at acquisition cost-based reimbursement.

In addition to ingredient cost, the other component to reimbursement is dispensing fees and state programs are also examining those. There is a delicate line to be walked between controlling spending and paying pharmacies so little that they refuse to participate in Medicaid.  On the utilization control side, particularly with the growth of specialty drugs, more use of step therapy and prior authorization can be expected.  Beneficiary cost-sharing is also being explored, but obviously with this population that is a tricky method to manage, because it can discourage prescription filling.   In the bigger picture, if states continue to move beneficiaries to managed care plans, they can worry less about the details of managing costs in various categories and leave that up to the plans.

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