(135) Understanding State Medicaid Spending on Prescription Drugs: A 10-State Comprehensive Analysis of Net State Medicaid Drug Spending as Part of the Total Medicaid Budget

Background: : In recent years, the cost of healthcare, and specifically prescription drugs, has become a topic of interest for policymakers. US State legislatures are considering and advancing legislation on payment limits and other drug pricing policies, including establishing Prescription Drug Affordability Boards (PDABs) and Health Care Availability and Access Boards.

Objective: : To put these policy discussions into context, this research aims to provide an estimate of net state Medicaid spending on prescription drugs in 10 states (CA, CO, FL, MA, MI, NY, OH, OR, PA, and WA) in FY 2023 with significant Medicaid spend and/or policy discussions around spend in fiscal year (FY) 2023 based on publicly available sources (e.g., state budgets, Centers for Medicare and Medicaid Services (CMS) reports).

Methods: : State Medicaid drug expenditures and drug rebate income were analyzed to generate an overview of state spending on prescription drugs and estimate Medicaid drug spending as a percentage of total Medicaid expenditures for 10 states in FY 2023. Medicaid data from sources included Medicaid State Drug Utilization Data, Medicaid Budget and Expenditure System/State Children's Health Insurance Program (CHIP) Budget and Expenditure System (MBES/CBES) Form CMS-64, and state budget documents. Limitations include: uncertainty regarding inpatient hospital spending on drugs due to bundled payments (i.e., drug costs not separately identified from hospital costs), MCO spending on prescription drugs due to limited public reporting, and a lack of transparency across states as to what types of information states publish relating to Medicaid spending. This analysis does not consider state 340B drug spending because of the lack of available information about the use of 340B drugs for Medicaid beneficiaries.

Results: : Using publicly available data, state Medicaid net prescription drug spending as a percentage of overall Medicaid budget ranged from 4.7% to 14.3% across 10 states. These findings are near or below the national rate of drug spending as a share of overall healthcare spending of 14%, which is also below the average drug spending share of medical spending across comparable countries. Manufacturer drug rebates back to states ranged from $83M (OR) to $1.9B (NY).

Conclusions: : This analysis demonstrates that state Medicaid programs are estimated to be spending near, or below, the US national average on prescription drugs. While high drug pricing makes headlines and is often the focus of legislation and policymaker attention, drug pricing is not the main driver of state Medicaid spending based on this estimate.

Sponsorship:: Johnson & Johnson