Medicaid Rx Spend Drivers: A Focus on Two Key Therapeutic Categories

Sep 22, 2016
Costs and utilization for diabetes and hepatitis C are expected to continue to grow in their impact on managed Medicaid plans for the next several years. Health plans need to employ multiple and varied strategies to address these cost increases.
  • Medicaid
  • Diabetes
  • Hepatitis C


As reported in the Express Scripts 2015 Drug Trend Report, diabetes and hepatitis C played a leading role in pharmacy spending among managed Medicaid plans. Given their role in driving spend for this population, and their forecasted impact on spend over the next three years, let’s take a more in-depth look at these two classes.

Additional Insights: Diabetes

Diabetes is the highest cost, non-specialty therapeutic category for our Medicaid clients.

Diabetes Medicaid

Most notably, the per member per year (PMPY) spend on diabetes in the Temporary Assistance for Needy Families (TANF) population represented 16.1% of total traditional drug spend and 10% of total TANF drug spend. For Aged, Blind or Disabled (ABD) members, diabetes represented 14.3% of total traditional drug spend and 10.3% of total ABD drug spend. We saw significant unit cost increases for all three major Medicaid populations, with the greatest increase noted in the ABD population. Unit cost increases were partly led by the introduction of several new insulins, such as Tresiba® (insulin degludec injection 200 U/mL), Ryzodeg® (insulin degludec and insulin aspart injection) and Toujeo® (insulin glargine injection), but price inflation of established insulins drove most of the cost growth. Some of this price inflation has been due to manufacturers anticipating impending biosimilar agents in this class.

When looking at medication adherence to diabetes therapies, we found that just 50.4% of patients were adherent, or had a Medication Possession Ratio (MPR) of 80% or higher. Interestingly, we found that men were more adherent than women and that the ABD population had the highest rates of adherence.

Diabetes Medicaid

Additional Insights: Hepatitis C

While the top three Medicaid specialty classes accounted for 67% of specialty trend, hepatitis C was the only therapy class that showed a negative trend. Individually, hepatitis C accounted for 18.3% of all specialty drug costs for TANF and 13.7% of specialty costs for ABD. Within the hepatitis C class, for Express Scripts clients, Harvoni® (ledipasvir and sofosbuvir) was the most expensive therapy in 2015, accounting for total drug spend of $44.56 per member per year.

Hep C Medicaid Trend

Despite increases in average drug cost, due partly to new entrants into the market, a negative utilization trend of 39.9% drove down the overall hepatitis C drug spend. A significant driver of this negative utilization trend was state carve-out of hepatitis C therapies from the managed Medicaid pharmacy benefit most likely because the financial strain these products caused to state Medicaid budgets and the challenges states faced in appropriately factoring the costs of these medications in health plan capitation rates. In addition, states may have chosen to cover these medications under the fee-for-service benefit as a way to respond to increasing pressure from CMS and advocacy groups to relax coverage criteria for these medications, allowing more people to receive these breakthrough therapies. Coverage of hepatitis C therapies under the FFS benefit not only enabled states to better control coverage criteria and utilization, but it also enabled states to have more control over the costs of the medications because it allowed states to receive all of the manufacturer rebates negotiated for these therapies.

To demonstrate the impact of the state carve-outs on this therapy class, if we removed from our analysis the utilization for states that implemented hepatitis C carve-outs during 2015 , we see that hepatitis C trend was positive – 10%. While overall utilization was still negative, the negative utilization trend was not as significant. In addition, unit cost is also greater when the utilization data from states with hepatitis C carve-outs are excluded.

Hep C Medicaid Carve

When the first hepatitis C products came to market, manufacturers were unwilling to offer discounts through rebates. As more products entered the market, Express Scripts acted quickly to generate cost competition among the manufacturers in the form of rebates. This yielded dramatic savings for our clients, but it also changed the industry marketplace for hepatitis C therapies by providing a mechanism for other entities to begin negotiating additional discounts on these products.

When we look at adherence to hepatitis C medications, we see surprisingly high adherence rates. Namely, on average, most individuals with these therapies have an average MPR of 0.96, well above the industry-accepted level for adherence. In fact with MPRs in this range, many of these patients have nearly perfect adherence. As we saw with diabetes adherence, men demonstrated slightly better adherence than women.

Hep C Medicaid Adherence

Looking Ahead

Costs and utilization for diabetes and hepatitis C are expected to continue to grow in their impact on managed Medicaid plans for the next several years. Health plans need to employ multiple and varied strategies to address these cost increases. Utilization management and formulary management are essential tools that help ensure the best medications are provided to the members who need them. Express Scripts supports our clients with innovative utilization management options and formulary cost modeling.

In addition, specialty drug management is a critical component to managing drug trend. At Express Scripts, our specialty patients receive one-on-one care provided by specialty-trained pharmacists and nurses, while our clients can benefit from savings programs like site of care management and medical benefit management of specialty drugs. Health plans that want to actively manage these products need to ensure the right drugs are being used correctly, and in the most cost-effective setting.

Finally, pharmacy network management should not be overlooked as an essential tool. Plans can find valuable savings by managing the size of their pharmacy network and maximizing the use of the most effective pharmacy providers.

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