The rising cost of prescription drugs will increasingly tax state budgets as Medicaid programs have little control over how much they spend on medications, Medicaid directors and researchers told me recently.
Many states are expected to struggle in controlling drug costs, largely because Medicaid programs must pay for all federally approved drugs.
Spending on Medicaid has grown dramatically in recent years due to the expansion of 32 Medicaid programs under the Affordable Care Act. That growth is expected to slow in coming years as new enrollment dwindles, but prescription drug costs will likely continue to be a major cost driver for state Medicaid budgets.
Enrollment in Medicaid programs nationwide grew more than 13 percent on average in fiscal year 2015, according to a survey of Medicaid directors by the Kaiser Family Foundation. In fiscal year 2016, Medicaid enrollment grew on average 3.9 percent and Medicaid spending grew 5.9 percent.
“They don't have a lot of influence over pricing,” Vern Smith, who worked on the survey for Kaiser and serves as a senior fellow at the Washington-based consulting firm Health Management Associates, told me. “States can't pick and choose what drugs to cover, so they'll likely try to find savings wherever they can.”
Even those states that didn't expand Medicaid are contending with growing drug costs, according to the Kaiser report. Nearly every Medicaid director flagged the high cost of specialty drugs as a major driver of Medicaid spending.
Many Medicaid directors have complained about the high cost of Sovaldi, a drug approved to treat chronic hepatitis C. A 12-week regiment of the drug is reported to cost $84,000.
Most states are refining their pharmacy programs, hoping to take better advantage of rebate programs and managed care organizations to pay less for drugs, he said.
Some are refining how they determine which drugs are medically necessary—the approval process for Medicaid beneficiaries to get prescriptions, Smith said. By being more diligent with approvals, he said, Medicaid programs can reduce the costs of unnecessary prescriptions.
However, rising drug prices could simply be a reality that Medicaid programs must contend with by reducing other costs or focusing on the long-term benefits of these drugs, John McCarthy, vice president of the National Association of Medicaid Directors and director of Ohio's Medicaid program, told me. He pointed to Sovaldi as an example of an expensive drug that nevertheless reduces the long-term costs associated with treating someone with hepatitis C.
Stay on top of new developments in health law and regulation with a free trial to the Health Law Resource Center.
Learn more about Bloomberg Law and sign up for a free trial.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)