Medicaid's Most Costly Outpatient Drugs
Issue Brief
Bianca DiJulio, Jamie Firth, and Mollyann Brodie, Kaiser Health Tracking Poll: August 2015 (Washington DC: Kaiser Family Foundation, August 2015), https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-august-2015/.
This total also includes CHIP enrollment. See “Total Monthly Medicaid and CHIP Enrollment,” Kaiser Family Foundation, accessed July 6, 2016, https://www.kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/.
U.S. Congress, Senate, Committee on Finance, The Price of Sovaldi and Its Impact on the U.S. Health Care System, 114th Congress, 1st session, 2015, 80, http://www.finance.senate.gov/imo/media/doc/1%20The%20Price%20of
%20Sovaldi%20and%20Its%20Impact%20on%20the%20U.S.%20Health%20Care%20System%20(Full%20Report).pdf.Julia Paradise and Rachel Garfield, What is Medicaid’s Impact on Access to Care, Health Outcomes, and Quality of Care? Setting the Record Straight on the Evidence (Washington DC: Kaiser Commission on Medicaid and the Uninsured, August 2013), https://www.kff.org/medicaid/issue-brief/what-is-medicaids-impact-on-access-to-care-health-outcomes-and-quality-of-care-setting-the-record-straight-on-the-evidence/.
This includes rebates and spending through managed care. See “National Health Expenditure Accounts,” CMS, accessed July 6, 2016, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html.
Laura Snyder and Robin Rudowitz, Trends in State Medicaid Programs: Looking Back and Looking Ahead, (Washington DC: Kaiser Commission on Medicaid and the Uninsured, June 2016), https://www.kff.org/medicaid/issue-brief/trends-in-state-medicaid-programs-looking-back-and-looking-ahead/.
In aggregate, the 50 most costly drugs compose about 40% of Medicaid drug spending before rebates over this period.
This is the case for beneficiaries not also dually enrolled in Medicare. Since 2006, Medicare Part D has paid for outpatient prescriptions of beneficiaries dually enrolled in Medicaid and Medicare.
42 USC § 1396r-8(b)(1)(A).
42 USC § 1396r-8(a)(1).
Brian Bruen and Katherine Young, What Drives Spending and Utilization on Medicaid Drug Benefits in States? (Washington DC: Kaiser Commission on Medicaid and the Uninsured, December 2014), http://files.kff.org/attachment/brief-what-drives-spending-and-utilization-on-medicaid-drug-benefits.
Vernon Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz, Laura Snyder, and Elizabeth Hinton, Medicaid Reforms to Expand Coverage, Control Costs and Improve Care: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2015 and 2016, (Washington DC, Kaiser Commission on Medicaid and the Uninsured, October 2015), https://www.kff.org/medicaid/report/medicaid-reforms-to-expand-coverage-control-costs-and-improve-care-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2015-and-2016/.
This includes outpatient prescription drug spending for both managed care and fee-for-service, as well as incorporating rebates. Share of Medicaid spending does not include administrative or other non-personal care Medicaid spending. See National Health Expenditure Accounts, op. cit.
Medicaid and CHIP Payment and Access Commission, “June 2016 Report to Congress on Medicaid and CHIP,” (Washington DC, June 2016), https://www.macpac.gov/wp-content/uploads/2016/06/June-2016-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
42 CFR Part 447.
77 Fed. Reg. 5318 (Feb. 2, 2012).
Brian Bruen and Katherine Young, Paying for Prescribed Drugs in Medicaid: Current Policy and Upcoming Changes, (Washington DC, Kaiser Commission on Medicaid and the Uninsured, May 2014), https://www.kff.org/medicaid/issue-brief/paying-for-prescribed-drugs-in-medicaid-current-policy-and-upcoming-changes/ and Smith, Gifford, Ellis, Rudowitz, Snyder, and Hinton, op. cit.
Smith, Gifford, Ellis, Rudowitz, Snyder, and Hinton, op. cit.
Spending does not include rebates. For further details see the methodology section in the appendix.
Four out of five of these drugs are in the top quartile by prescriptions. The fifth is in the top 50th percentile by prescriptions. Although these drugs do not meet our definition of being “frequently prescribed,” they also are not rarely prescribed.
“Drug overdose deaths in the United States hit record numbers in 2014,” CDC, accessed July 6, 2016, http://www.cdc.gov/drugoverdose/epidemic/index.html.
Drew Altman, “Why Painkiller Addiction and Abuse are Rising Health-Care Priorities,” The Wall Street Journal, November 24, 2015, http://blogs.wsj.com/washwire/2015/11/24/why-painkiller-addiction-and-abuse-are-rising-health-care-priorities/.
Vikki Wachino, “Best Practices for Addressing Prescription Opioid Overdoses, Misuse and Addiction,” CMCS Informational Bulletin, CMS, January 28, 2016, https://www.medicaid.gov/federal-policy-guidance/downloads/cib-02-02-16.pdf.
The FDA has approved three medications for the treatment of opioid use disorder: buprenorphine, methadone, and naltrexone. Ibid.
Prior to Medicaid expansion, in FY 2011, over 200,000 Medicaid enrollees were diagnosed with HIV or AIDS. See “Medicaid Enrollment and Spending on HIV/AIDS”, Kaiser Family Foundation, accessed July 6, 2016, https://www.kff.org/hivaids/state-indicator/enrollment-spending-on-hiv/. Medicaid plays an important role in the care of people with HIV or AIDS and Medicaid expansion has increased the number of HIV patients in care. See Jennifer Kates, Lindsey Dawson, Tresa Undem, and Kathleen Perry, Health Insurance Coverage for People with HIV Under the Affordable Care Act: Experiences in Five States, (Washington DC, Kaiser Family Foundation, December 2014), https://www.kff.org/hivaids/issue-brief/health-insurance-coverage-for-people-with-hiv-under-the-affordable-care-act-experiences-in-five-states/.
Twenty-four percent of non-institutionalized Medicaid and CHIP enrollees had respiratory diseases in 2013 that incurred medical expenses. KFF analysis of 2013 Medical Expenditure Panel Survey (MEPS) household component, meps.ahrq.gov/mepsweb/.
Medicaid and CHIP Payment and Access Commission, “Behavioral Health in the Medicaid Program – People, Use, and Expenditures,” June 2015 Report to Congress on Medicaid and CHIP, (Washington DC, June 2015), https://www.macpac.gov/wp-content/uploads/2015/06/June-2015-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
Louise Carton, Olivier Cottencin, Maryse Lapeyre-Mestre, Pierre Geoffroy, Jonathan Favre, Nicolas Simon, Regis Bordet, and Benjamin Rolland, “Off-Label Prescribing of Antipsychotics in Adults, Children, and Elderly Individuals: A Systematic Review of Recent Prescription Trends,” Current Pharmaceutical Design, 21, 23 (2015): 3280-3297, http://www.eurekaselect.com/132298/article. This practice of prescribing medications for uses not approved by the FDA is called “off-label prescribing” and is legal for non-controlled substances such as opioids. However, it is illegal for a pharmaceutical company to market the drug for off-label uses. See “Off-label Drug Use,” American Cancer Society, accessed July 6, 2016, http://www.cancer.org/treatment/treatmentsandsideeffects/treatmenttypes/chemotherapy/off-label-drug-use.
Ed Silverman, “Insulin prices have skyrocketed, putting drug makers on the defensive,” Stat News, April 5, 2016, https://www.statnews.com/pharmalot/2016/04/05/insulin-prices-skyrocketed-putting-drug-makers-defensive/.
KCMU and Urban Institute estimates based on data from FY 2011 MSIS.
Committee on Finance, op. cit., 1.
Ibid.
Paradise and Garfield, op. cit.
FDA, FDA Approves Sovaldi for Chronic Hepatitis C, December 6, 2013, http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm377888.htm
“What is Sovaldi?” Drugs.com, accessed July 6, 2016, http://www.drugs.com/sovaldi.html.
Gilead Sciences, U.S. Food and Drug Administration Approves Gilead’s Harvoni ® (Ledipasvir/Sofosbuvir), the First Once-Daily Single Tablet Regimen for the Treatment of Genotype 1 Chronic Hepatitis C, October 10, 2014, http://www.gilead.com/news/press-releases/2014/10/us-food-and-drug-administration-approves-gileads-harvoni-ledipasvirsofosbuvir-the-first-oncedaily-single-tablet-regimen-for-the-treatment-of-genotype-1-chronic-hepatitis-c
B.E. and A.R. v. Teeter, No. C16-227-JCC (W.D. Wa. May 27, 2016), https://today.law.harvard.edu/wp-content/uploads/2016/06/40-5-27-16-Order-Granting-Preliminary-Injunction.pdf.
Committee on Finance, op. cit., 87-88.
Ibid, 82.
42 USC § 1396r-8.
“Assuring Medicaid Beneficiaries Access to Hepatitis C (HCV) Drugs,” Medicaid Drug Rebate Program Notice, CMS, November 5, 2015, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Downloads/Rx-Releases/State-Releases/state-rel-172.pdf.
Micael Ollove, “Are States Obligated to Provide Expensive Hepatitis C Drugs?” Kaiser Health News, February 10, 2016, http://kffhealthnews.org/news/are-states-obligated-to-provide-expensive-hepatitis-c-drugs/.
Ed Silverman, “Washington State Told to Lift Restrictions on Hepatitis C Medicines,” Stat News, May 27, 2016, https://www.statnews.com/pharmalot/2016/05/27/washington-state-hepatitis-drug-prices/.
Associated Press, “Florida Changes Hep C Drug Policy For Medicaid After Lawsuit,” June 1, 2016, Tampa Bay Times, http://health.wusf.usf.edu/post/florida-changes-hep-c-drug-policy-medicaid-after-lawsuit#stream/0. Don Sapatkin, “Delaware will treat all Medicaid patients with hepatitis C,” June 9, 2016, http://articles.philly.com/2016-06-09/news/73647247_1_medicaid-patients-hepatitis-c-state-medicaid-program.
Robert Field, “Regulation of Drugs and Health Care Products” in Health Care Regulation in America: Complexity, Confrontation, and Compromise, (Oxford, England: Oxford University Press, 2007), 115-140.
Atypical antipsychotics are the second generation of antipsychotic drugs. They came onto the market in 1993, had fewer neurological side-effects than first generation antipsychotics, and were thought to be more effective in some schizophrenia symptoms. See Richard A. Friedman, “A Call for Caution on Antipsychotic Drugs,” New York Times, September 24, 2012, http://www.nytimes.com/2012/09/25/health/a-call-for-caution-in-the-use-of-antipsychotic-drugs.html.
“Orange Book: Approved Products with Therapeutic Equivalence Evaluations,” FDA, accessed July 6, 2016, http://www.accessdata.fda.gov/scripts/cder/ob/docs/querytn.cfm.
A boxed warning, commonly known as a “black box warning,” is a FDA warning added to the drug label describing serious or life-threatening risks. See “A Guide to Drug Safety Terms at the FDA,” FDA, accessed July 6, 2016, http://www.fda.gov/downloads/ForConsumers/ConsumerUpdates/UCM107976.pdf. It warns prescribing physicians to seriously consider the benefits of the drug given the known serious risks. Black box warnings can have an effect on the sales of the drug. See Lara Maggs and Aaron Kesselheim, “The Role of Black Box Warnings in Safe Prescribing Practices,” Health Affairs Blog, August 20 2014, http://healthaffairs.org/blog/2014/08/20/the-role-of-black-box-warnings-in-safe-prescribing-practices/.
Gardiner Harris, “Popular Drugs for Dementia Tied to Deaths,” New York Times, April 12, 2005, http://www.nytimes.com/2005/04/12/health/popular-drugs-for-dementia-tied-to-deaths.html?login=email.
Friedman, op. cit.
The FDA approved Abilify for treating children with Tourette syndrome in late 2014 and provided it with an orphan drug designation. Then, despite the sponsor not having applied for it, the FDA broadened Abilify’s designation to also include adults with Tourette syndrome, meaning that the population with the disease was too large for an orphan drug designation. Although Abilify’s manufacturer contested this, saying that the FDA could not provide a drug with a designation for which the sponsor had not applied, they were not successful in their bid. See Ed Silverman, “FDA Approves Generic Abilify After Unusual Legal Battle with Otsuka,” The Wall Street Journal, April 29, 2015, http://blogs.wsj.com/pharmalot/2015/04/29/fda-approves-generic-abilify-after-unusual-legal-battle-with-otsuka-2/.
The 2014 Drug Trend Report, (Express Scripts, March 2015).
If the New Drug Application (NDA) is for a drug with an active ingredient that the FDA has previously approved, but this drug is a new dosage form, new indication, or is now available as over-the-counter, the FDA approval grants a 3-year regulatory exclusivity period. If the drug contains chemical entities that have not previously been submitted to the FDA, the FDA generally grants a 5-year regulatory exclusivity period. The FDA provides an additional six months of exclusivity to sponsors who run pediatric studies on the submitted drug. See John Thomas, The Role of Patents and Regulatory Exclusivities in Pharmaceutical Innovation, (Washington DC: Congressional Research Service, January 7, 2013), http://www.ipmall.info/hosted_resources/crs/R42890_130107.pdf.
To obtain FDA approval for a generic drug, a manufacturer must show that the drug is identical to the brand in “dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.” “What Are Generic Drugs?” FDA, accessed July 6, 2016, http://www.fda.gov/drugs/resourcesforyou/consumers/buyingusingmedicinesafely/understandinggenericdrugs/ucm144456.htm.
Ibid.
The Drug Price Competition and Patent Term Restoration Act of 1984, usually referred to as the Hatch-Waxman Act, created this framework of bringing generic drugs to market by allowing sponsors to file Abbreviated New Drug Applications (ANDAs) where they proved bioequivalence. At the same time, the Hatch-Waxman Act incentivized innovation by rewarding sponsors of new molecular entities and other brand drugs with varying lengths of regulatory exclusivity.
We considered a drug a brand-name drug if it was single-source, or if it was the originator product, but is now available from multiple sources.
“Frequently Asked Questions About Therapeutic Biological Products,” FDA, accessed July 6, 2016, http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/
ApprovalApplications/TherapeuticBiologicApplications/ucm113522.htm.A manufacturer obtains FDA approval for a biologic through a Biologic License Approval (BLA) as opposed to an NDA or an ANDA.
Specifically, the part of the ACA that creates a framework for the approval of biosimilars and regulatory exclusivity to the original biologic is referred to as the Biologics Price Competition and Innovation Act. Biosimilars are not bioequivalent to the previously approved FDA biologic, in contrast to generic drugs which are bioequivalent to previously approved small-molecule drugs. Instead, biosimilars must be highly similar and interchangeable with the previously approved biologics.
It is possible that this may change in the future if the Trans-Pacific Partnership passes, as one point of negotiations between countries was the period of regulatory exclusivity for biologics.
Andrew Mulcahy, Zachary Predmore, and Soeren Mattke, “The Cost Savings Potential of Biosimilar Drugs in the United States,” (Rand Corporation, 2014), https://www.rand.org/content/dam/rand/pubs/perspectives/PE100/PE127/RAND_PE127.pdf.
Zarxio is a biosimilar to Neupogen, a biologic used to stimulate white blood cell growth in the treatment of cancer, bone marrow transplants, and chemotherapy. (“Neupogen,” Drugs.com, accessed July 6, 2016, http://www.drugs.com/neupogen.html.) However, Neupogen was not one of the 50 most costly drugs, nor was it one of the 50 most expensive drugs per prescription (Appendix Table A2).
Congress passed the Orphan Drug Act in 1982 to provide incentive for manufacturers to produce drugs for diseases rare enough that there had not previously been financial incentive to do so. Congress amended the law three times in the 80s, eventually arriving at these parameters for an orphan drug designation. See Gary Pulsinelli, “The Orphan Drug Act: What’s Right with It,” Santa Clara High Technology Law Journal, 5, 2. (January 1999): http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1247&context=chtlj and “Developing Products for Rare Diseases & Conditions,” FDA, accessed July 6, 2016, http://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/ucm2005525.htm.
These benefits also include federal funding for clinical trials and tax breaks, as well as other advantages. See Aaron Kesselheim, “Innovation and the Orphan Drug Act, 1983-2009: Regulatory and Clinical Characteristics of Approved Orphan Drugs” in Rare Diseases and Orphan Products: Accelerating Research and Development, (Washington DC: Institute of Medicine, 2010), 291-308, http://www.ncbi.nlm.nih.gov/books/NBK56187/.
Since 1983, the FDA has provided orphan drug designations to over 400 drugs that have gone to market. Between 1973 and 1983, there were fewer than 10. See “Developing Products for Rare Diseases & Conditions,” FDA, accessed July 6, 2016, http://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/ucm2005525.htm.
Marty Makary, “One Pharma Fix: Limit the ‘Orphan Drug’ Incentives,” Wall Street Journal, Dec. 20, 2015, http://www.wsj.com/articles/one-pharma-fix-limit-the-orphan-drug-incentives-1450645511.
Bruen and Young, December 2014, op. cit.
Smith, Gifford, Ellis, Rudowitz, Snyder, and Hinton, op. cit.
Steve Miller, “Harvoni: Orphan-Drug Pricing for a Non-Orphan Drug,” (Express Scripts, October 2014), http://lab.express-scripts.com/lab/insights/specialty-medications/harvoni-orphan-drug-pricing-for-a-nonorphan-drug.
Vernon K. Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz, and Laura Snyder, Medicaid in an Era of Health & Delivery System Reform: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2014 and 2015, (Washington DC, Kaiser Commission on Medicaid and the Uninsured, October 2014), https://www.kff.org/medicaid/report/medicaid-in-an-era-of-health-delivery-system-reform-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2014-and-2015/.
B.E. and A.R. v. Teeter, op. cit.
“Getting a Liver Transplant,” National Kidney Foundation, accessed July 6, 2016, https://www.kidney.org/atoz/content/livertx.
Committee on Finance, op. cit., 1.
Matt Salo, executive director of the National Association of State Medicaid Directors, conveyed the dilemma saying “We would be spending more on this one drug than all other drugs combined […] There isn’t the capacity to do that.” See Michael Ollove, “Are States Obligated to Provide Expensive Hepatitis C Drugs?” (Pew Trusts, February 2016), http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2016/02/09/are-states-obligated-to-provide-expensive-hepatitis-c-drugs.
“Assuring Medicaid Beneficiaries Access to Hepatitis C (HCV) Drugs,” op. cit.
42 USC § 1396r-8(d). States may restrict certain drugs categorically, but hepatitis C agents are not on this list. Statute allows states to restrict weight loss or weight gain drugs; fertility drugs; cosmetic or hair growth drugs; cold or cough relief drugs; smoking cessation drugs; vitamins and minerals, except for prenatal use; non-prescription drugs, except for pregnant women; drugs where along with them, the manufacturer requires certain tests or services be provided by a designee; barbituates; benzodiazepines; and drugs for sexual or erectile dysfunction, unless these drugs are used for another approved condition.
B.E. and A.R. v. Teeter, op. cit. and CMS, “Assuring Medicaid Beneficiaries Access to Hepatitis C (HCV) Drugs,” op. cit.
Methadone is a type of opioid. It is used for the treatment of opioid use disorder, and more recently, for the treatment of pain. However, it is a “complex medication to prescribe for pain relief,” and as a treatment for pain is associated with a disproportionate share of opioid-related deaths. See Wachino, 2016, op. cit.
- Drug Utilization Reviews are a mechanism for state Medicaid programs to monitor beneficiaries’ prescriptions to prevent potential oversights that might harm beneficiaries, such as drug-disease contraindications or incorrect dosages. They are also a way for state Medicaid programs to identify overuse, abuse, or fraud within the prescription drug benefit. See “Drug Utilization Review,” CMS, accessed July 6, 2016, https://www.medicaid.gov/medicaid-chip-program-information/by-topics/benefits/prescription-drugs/drug-utilization-review.html.
Wachino, 2016, op. cit. CMCS also outlines ways to increase the availability and administration of naloxone, a drug used to counteract opioid overdoses, as well as ways to expand treatments for opioid use disorder.
- Barry Meier and Sabrina Tavernise, “States Move to Control How Painkillers Are Prescribed,” New York Times, March 11, 2016, http://www.nytimes.com/2016/03/12/business/states-move-to-control-how-painkillers-are-prescribed.html
Ibid.
HHS, HHS awards $94 million to health centers to help treat the prescription opioid abuse and heroin epidemic in America, March 11, 2016, http://www.hhs.gov/about/news/2016/03/11/hhs-awards-94-million-to-health-centers.html.
“CDC Guideline for Prescribing Opioids for Chronic Pain.” CDC, accessed July 6, 2016, http://www.cdc.gov/drugoverdose/prescribing/guideline.html.
Vikki Wachino, “2016 Updates to the Child and Adult Core Health Care Quality Measurement Sets,” CMCS Informational Bulletin, CMS, December 11, 2015. https://www.medicaid.gov/federal-policy-guidance/downloads/cib-12-11-15.pdf.
“Drug Advertising: A Glossary of Terms,” FDA, accessed July 6, 2016, http://www.fda.gov/Drugs/ResourcesForYou/Consumers/PrescriptionDrugAdvertising/ucm072025.htm.
Wachino, 2015, op. cit.
Appendix B: Methodology
Copyright 2016, Wolters Kluwer Clinical Drug Information, Inc.
“CDER List of Licensed Biological Products,” FDA, Center for Drug Evaluation and Research, accessed July 6, 2016, http://www.fda.gov/Drugs/DevelopmentApprovalProcess/
HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm411418.htm “CBER List of Licensed Biological Products” FDA, Center for Biologic Evaluation and Research, accessed July 6, 2016, http://www.fda.gov/Drugs/DevelopmentApprovalProcess/
HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm411418.htm.Searchable version of the Orphan Drug Product designation database, FDA, http://www.accessdata.fda.gov/scripts/opdlisting/oopd/.
We pulled formulary information from CVS CareMark, Express Scripts, and Optum Rx.
“States Collection of Medicaid Rebates for Physician Administered Drugs,” (Washington DC: U.S. Department of Health and Human Services- Office of Inspector General, June 2011), http://oig.hhs.gov/oei/reports/oei-03-09-00410.pdf. For further discussion, see Bruen and Young, December 2014, op cit.
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