Medicaid Spending on Prescriptions Has Risen Despite Lower Utilization

Although there’s been lower utilization of prescription medications, Medicaid spending on prescription drugs has increased, a recent report shows.

The KFF report relied on 2016 to 2022 State Drug Utilization Data, as well as CMS-64 Financial Management Reports from fiscal year 2017 to fiscal year 2022. It comes as states unwind the continuous enrollment provision, which prevented states from disenrolling Medicaid enrollees during the Covid-19 public health emergency. Because of the continuous enrollment provision, Medicaid and CHIP enrollment reached historic highs, peaking at 94.5 million people in April. This represents an increase of 23.1 million people from 2020.

But despite the growth in Medicaid enrollment, Medicaid prescription drug utilization was below fiscal year 2017 levels through fiscal year 2022, the researchers found. In 2017, there were 765.6 million prescriptions. In 2020, the number of prescriptions declined to 716.9 million. Then in 2022, the number of prescriptions increased to 761.1 million (but still less than in 2017). In 2017, there were 11.4 prescriptions per enrollee, versus 10.8 prescriptions per enrollee in 2020 and 9.4 prescriptions per enrollee in 2022. This proves that there was “lower drug utilization among those individuals enrolled during the continuous enrollment provision.”

Despite the decline in utilization of prescription drugs, net spending (spending after rebates) on Medicaid prescription drugs is estimated to have increased to $43.8 billion in 2022 from $29.8 billion in 2017. This represents a 47% increase. Net spending per prescription increased to $58 in 2022 from $39 in 2017. Gross Medicaid spending (spending before rebates) on outpatient prescription drugs also increased to $92.3 billion in 2022 from $64.7 billion in 2017.

The increase in Medicaid drug spending is likely due to the increased spending on high-cost brand drugs, KFF noted.

“Studies have found substantial drug price increases beyond the rate of inflation in recent years as well as increasing launch prices for new drugs,” the report stated.

What should healthcare stakeholders watch out for in the future? Millions of people are expected to lose Medicaid coverage as states unwind the continuous enrollment provision. This could “impact future drug utilization trends depending on how much enrollment declines and how the health needs of those remaining on the program change. While national utilization trends may remain relatively stable as they have in recent years, loss of Medicaid coverage on an individual level could have severe consequences for those who rely on regular access to prescription drugs,” KFF said.

The researchers added that there have been efforts at both the state and federal levels to lower prescription drug costs, such as the Inflation Reduction Act and proposed legislation that aims to tamp down on the practices of pharmacy benefit managers (PBMs). All states have also adopted at least one law directed at PBMs, KFF noted.


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