Florida Medicaid’s State-Mandated Formulary: Impact on Utilization and Cost

Oct 13, 2016
Research presented at the Academy of Managed Care Pharmacy shows state-mandated formulary provision experiences higher pharmacy costs and lower medication use.
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  • Medicaid

ES Bottles

In 2011, when the Florida legislature created the state’s Medicaid Managed Care (SMMC) program, one of the requirements for participating managed care organizations (MCOs) was to use a state-mandated formulary drug list (PDL), rather than allowing plans to maintain their own formulary, as was previously allowed.

To understand the impact of this change, our research team at the Express Scripts Lab studied changes in prescription drug utilization and plan costs among Florida Medicaid members required to use the state-mandated PDL and compared them to members enrolled in a similar Medicaid managed care health plan in a different state, where no such state-mandated PDL policy existed.

Methodology

As part of our study, presented during the Academy of Managed Care Pharmacy (AMCP) Nexus meeting, we examined costs in both health plans during a period of time prior to the implementation Florida’s state-mandated formulary, and after its implementation.

To ensure we fairly compared utilization changes across health plans, we applied a methodology known as a one-to-one greedy matching algorithm to match patients on demographic, health, and Medicaid coverage-related variables.

The Results

Overall drug utilization declined, yet plan costs increased among Florida Medicaid members in the period after state-mandated PDL policy implementation, mainly driven by decreases in generic utilization and increases in brand drug utilization and cost.

Specifically, when comparing Florida members pre- and post- implementation of the mandated formulary, overall plan drug costs increased by more than 45% in the post-policy period, driven by a nearly 49% increase in brand drug plan costs.

Among the Florida Medicaid plan members, utilization of overall traditional, or non-specialty, drug claims declined by about 9% with generic drug utilization declining by 13%. Meanwhile, brand drug utilization increased by 50% in the post-policy period when compared to pre-policy period.

In comparison, both utilization and cost remained stable during the same time period for the other reference health plan members who were not subject to a state-mandated formulary.

Also noteworthy is the higher proportion of brand drugs switching from non-formulary status pre-implementation to formulary status in the post-implementation period in the Florida plan: 79% compared to just 1% in the comparison plan.

Insights

The findings of this study offer evidence that state-mandated formularies may contribute to unintended consequences of decreased generic drug utilization and increased plan costs, potentially resulting from the increased number of brand drugs that may become part of the drug formulary after mandated formularies are implemented.

Additional research is needed to better understand the impact of state-mandated formularies, inclusive of the impact of state rebates on overall drug spend. However, we can infer from this study that state regulations should permit participating plans to leverage utilization management strategies, including MCO managed formularies, to control costs and advocate for appropriate, cost-effective therapy. States may be able to prevent any unforeseen effects on medication use and plan costs with mandated formularies by taking into consideration drug utilization changes among beneficiaries and health plan financial viability.

Overall, partnership between state Medicaid agencies and health plans is essential for ensuring access to appropriate medications while cost-effectively managing access to these medications. States need to anticipate increased drug costs for health plans and make equitable adjustments to plan capitation rates.

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