Medicaid Outpatient Drug Spending Tops $27 Billion

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By Nathaniel Weixel

July 21 — Medicaid spent over $27 billion on outpatient drugs in 2014, and the antipsychotic Abilify was the most expensive, according to a recent analysis by the Kaiser Family Foundation.

Other drugs atop the list included the hepatitis C medications Sovaldi and Harvoni; the attention deficit medicine Vyvanse; and the HIV drug Truvada. The drugs Medicaid spent the most on were often the ones with the highest price tags. But in many cases, the study found, the drugs at the top of the list got there because of heavy prescribing. Of the 50 most costly drugs, 45 fall into the high-cost category at least in part because they are very frequently prescribed, the study found.

As states continue to grapple with controlling Medicaid prescription drug spending, many are focusing on high-cost “specialty drugs.” But it's not clear that the focus should be on cost alone. For example, the most-prescribed drugs in the KFF study are fairly inexpensive ones used for pain relief (hydrocodone-acetaminophen and ibuprofen), management of chronic illness (lisinopril and omeprazole), and antibiotics (amoxicillin).

The most frequently prescribed drug in the entire Medicaid program from January 2014 through June 2015 was hydrocodone-acetaminophen, the generic version of Vicodin.

Opioid Use

Jeffrey Myers, president and chief executive officer of the Medicaid Health Plans of America (MHPA), said policy makers should be very concerned that an opioid—a category of drugs that are highly addictive—was the most-prescribed drug in Medicaid.

“What is clear is that since the No. 1 prescribed drug is an opioid, after all the policy discussions, it shows there’s more to be done,” Myers told Bloomberg BNA.

As a drug class, opioids were the second most prescribed drug group over the period of study and the most prescribed drug group in 2014. According to the federal government, Medicaid patients are prescribed opioids at twice the rate as other patients, and their risk of overdose is three to six times higher than other patients.

Congress recently passed legislation designed to curb the opioid abuse crisis (S. 524) and sent it to President Barack Obama. In addition, states are working to help solve the public health crisis. Myers said plans are working with states to require pharmacy lock-in provisions, to prevent pharmacist-shopping by addicts, and to prevent doctor shopping.

Katherine Young, a researcher at the Kaiser Family Foundation and one of the authors of the analysis, said it's important to understand that it's not just the price tags that factor into how much Medicaid spends on drugs.

“The actual cost of drug does matter,” Young said in a July 21 interview, but it needs to be considered together with how often a drug is prescribed.

“They are not all the most expensive outpatient drugs at the prescription level,” Young said. “That isn’t the entire story.”

Specialty Drugs

According to the most recent figures, Medicaid spending on outpatient prescription drugs jumped 24 percent in 2014 to $27.3 billion, or about 6 percent of Medicaid spending. This increase in the growth rate is in large part due to increased enrollment resulting from Medicaid expansion under the Affordable Care Act, and new high-cost “specialty” drugs.

There isn't a universally accepted definition for a specialty drug, but such a drug is generally considered to be a drug that requires difficult or unusual handling or is for a difficult-to-treat disease like cancer, multiple sclerosis and hepatitis C. Price is also often an indicator of a specialty drug. The Kaiser review found 34 percent of the drugs in the 50 most costly list are considered specialty drugs, which it said is a “disproportionate” number.

“No reasonable person can argue anymore that drug costs aren’t impacting the program,” MHPA's Myers told Bloomberg BNA.

States and Medicaid plans have attempted to control costs by instituting utilization policies like prior authorization. States can help control the overall costs of drugs by monitoring utilization, but they can't place unreasonable limits on access to medically necessary drugs.

The issue of high pharmaceutical prices has become a major concern for Medicaid plans in recent years as they are required to provide beneficiaries with extremely expensive specialty drugs coming onto the market,. But Young said, on a monthly per-prescription basis, drugs like Sovaldi and Harvoni, which have raised the most ire because of their costs, are not the most expensive. According to Kaiser, Harvoni cost Medicaid $28,977 per prescription, before any rebates. Sovaldi cost Medicaid $26,612 per prescription.

The KFF analysis noted that many drugs “that are quite costly at the per prescription level are not commonly used by Medicaid enrollees. These drugs, which include drugs to treat hemophilia (NovoSeven RT, Koate-DVI, Feiba), multiple sclerosis (HP Acthar), and rare infant diseases (Adagen), reflect Medicaid’s role in caring for individuals with substantial health needs.”

PhRMA Notes Competitive Market

A spokeswoman for the Pharmaceutical Research and Manufacturers of America said in an e-mail that Medicaid spending on prescription medicines remains about 5 percent of total Medicaid spending, net of rebates. The analysis examined list prices before rebates.

“The emphasis on drug spending ignores the competitive biopharmaceutical market in the U.S. and neglects the reality of the significant savings adherence to these treatments can generate for Medicaid programs,” Allyson Funk of PhRMA said.

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at

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