What’s Driving Rx Spend in Medicaid?

May 19, 2016
A review of spending drivers and best practices for managing Rx spend in Medicaid.
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  • Medicaid

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For the first time, our analysis examined trend for 3 major populations within our Medicaid book of business – Temporary Assistance for Needy Families (TANF), Children's Health Insurance Programs (CHIP) and the Aged, Blind or Disabled (ABD). We found TANF had the highest overall year-over-year increase in drug spending at 6.1%, while CHIP, which had the lowest PMPY spend at $287.75, had the highest overall increase in specialty medication spending of 20.6%.

TANF

CHIP 

At 2.9%, the ABD population had the lowest total increase in spending, but the highest PMPY drug spend – $1,170.71 – likely due to these beneficiaries having some of the highest health care needs and a higher number of comorbidities. Of the ABD population’s total PMPY costs, 72% was spent on traditional drugs ($845.96).

ABD 

Five Key Factors Driving Spending Increases

We noted five key factors driving spending increases among Medicaid health plans:

Specialty Medications: As seen in our other lines of business, specialty medications had a significant impact on spend increases. PMPY specialty drug spend for Medicaid health plans accounted for 36.5% of total Medicaid drug spend in 2015 – despite only a small portion of the Medicaid population using specialty medications.

HIV and hepatitis C classes of therapy led the 10.1% PMPY spend increase for specialty medications in Medicaid from 2014 to 2015.

PMPY spend for HIV topped the list of specialty medications, with unit costs for medications in the class increasing 10.8%. Brand drugs continue to dominate this class due to pipeline replenishment with newer and more potent drugs that tackle the continually mutating virus strains – even despite the wave of patent expirations.  In addition, the convenience of single daily dose medications in this class have led to increased utilization.

For hepatitis C, spending declined 9.7% in 2015, heavily influenced by 39.9% decline in utilization which stemmed from the multiple strategies implemented by state Medicaid programs to address budget strain from the expensive hepatitis C therapies. These strategies include prioritizing access to expensive therapies for the sickest patients, thorough utilization management, and carving out coverage of expensive therapies from the health plan managed pharmacy benefit to fee-for-service Medicaid.

Medicaid Expansion & Increased Use of Managed Care: In 2015, we continue to see the impact of enrollment growth propelled by the use of Medicaid Managed Care for new Medicaid Expansion enrollees who gained coverage as part of the Affordable Care Act (ACA). Approximately 23% of the U.S. population is now covered under Medicaid, including 15 million new beneficiaries who gained Medicaid coverage since the beginning of 2014. At present, about 70% of all Medicaid beneficiaries – 51 million Americans – now receive health benefits through Medicaid managed care health plans.

Diabetes: The leading traditional class of therapy among all of Express Scripts lines of business, diabetes, had Medicaid PMPY spend of $97.03 in 2015, which represents a 21.7% increase from 2014. Brand price inflation for Lantus® (insulin glargine) and Humalog (insulin degludec), and the unavailability of generic insulins, contributed to the 17.6% increase in unit costs in the class.

Asthma: Asthma medications again maintained their position in the top three traditional therapy classes, with PMPY spend of $62.73, further underscoring the significance of asthma spend to Medicaid plans as Medicaid is the largest payer for asthma-related hospitalizations among children and adults.

Mental Health: Among Medicaid beneficiaries, medications to treat mental/neurological disorders, attention disorders, pain/inflammation, depression and chemical dependence rank among the top ten traditional therapy classes ranked by PMPY spend in 2015. These five classes accounted for 33.4% of total traditional drug spend in Medicaid.

Top 10 Traditional Medication Therapy Classes

Medicaid Traditional 

Top 10  Specialty Medication Therapy Classes

Medicaid Specialty 

Three-Year Medicaid Forecast

According to our research, overall prescription drug spending in Medicaid is expected to steadily increase by an average of 8.7% between 2016 and 2018.  This is just slightly higher than the three-year trend expected in commercial health benefits during that the same time period.

Medicaid Forecast 

Spending among traditional therapies will rise by an average of 5.7% between 2016 and 2018 due to modest unit cost changes for traditional therapies in 2016.

The largest average traditional class increases in the next three years will be for the diabetes and attention disorder therapy classes. However, we anticipate spending decreases among three of the top ten traditional therapy classes – mental/neurological disorders, depression and high blood pressure/heart disease – between 2016 and 2018 due to declining unit costs resulting from patent expirations and greater generic dispensing.

Specialty trend in Medicaid is expected to increase steadily by an average of 13.6% over the next three years, driven by:

  • Expanded indications for existing drugs
  • Newer therapies in the pipeline
  • Higher prescribing rates
  • Wider adoption of therapies

State and federal legislative actions will also play a role in impacting Medicaid prescription drug trend, as many states are introducing legislation to 1) limit the use of specialty networks, 2) control which medications can be filled through exclusive specialty pharmacy arrangements, and 3) implement prescriber prevails authority for some classes of specialty drugs.

Best Practices

Controlling spend requires an integrated approach involving active management of specialty drugs and the use of pharmacy best practices to achieve improved patient outcomes and better savings. Specialty drug management and smart formulary management can help Managed Medicaid Plans address forecasted spending increases. Some best practices include:

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