Medicaid Prescription Costs Rise Despite Less Usage

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TL/DR –

Despite lower utilization of prescription medications, Medicaid spending on prescription drugs has increased significantly, according to a recent report by the Kaiser Family Foundation (KFF). The study, based on data from 2016 to 2022, found that although the number of prescriptions per Medicaid enrollee decreased, net spending on Medicaid prescription drugs rose by 47% from $29.8 billion in 2017 to $43.8 billion in 2022. The KFF suggested that this increase in spending is likely due to increased spending on high-cost brand drugs and substantial drug price increases beyond the rate of inflation in recent years.


Medicaid Drug Spending Rises Despite Lower Prescription Utilization

Healthcare prescription costs

Despite decreased prescription medication use, Medicaid spending on drugs has risen, according to recent research.

The study analyzed 2016 to 2022 State Drug Utilization Data and CMS-64 Financial Management Reports from 2017 to 2022. It highlights increasing Medicaid and CHIP enrollment, reaching record highs of 94.5 million people in April 2022 due to the continuous enrollment provision during the Covid-19 crisis.

Despite higher Medicaid enrollment, drug utilization was below 2017 levels through 2022. In 2017, there were 765.6 million prescriptions, decreasing to 716.9 million in 2020, and slightly increasing to 761.1 million in 2022. This trend suggests lower drug utilization among those enrolled during the continuous enrollment provision.

Nevertheless, net Medicaid spending on prescriptions (after rebates) increased to $43.8 billion in 2022 from $29.8 billion in 2017, a 47% increase. Gross spending (before rebates) on outpatient prescription drugs also rose to $92.3 billion in 2022 from $64.7 billion in 2017.

The rise in Medicaid drug spending is likely due to increased spending on high-cost branded drugs. Significant drug price increases and rising launch prices for new drugs have been noted in recent years.

As the continuous enrollment provision ends, millions could lose Medicaid coverage, potentially impacting future drug utilization trends. Loss of Medicaid coverage at an individual level could have serious implications for those who rely on consistent access to prescription drugs.

There are ongoing efforts at both state and federal levels to reduce prescription drug costs, such as the Inflation Reduction Act and proposed legislation targeting pharmacy benefit manager (PBM) practices. All states have adopted at least one law aimed at PBMs.


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