Despite Declining Use, Medicaid Spending on Prescription Drugs Has Increased

Despite a lower number of prescriptions in recent years, Medicaid spending on prescription drugs has increased, according to a new KFF analysis. Medicaid outpatient prescriptions peaked in 2017, before starting to decline and remaining below 2017 levels through 2022 – even with historic levels of Medicaid enrollment growth.

Both gross and net (after rebates) spending on prescription drugs have increased every year since 2019, likely driven by high-cost brand drugs. Net spending on Medicaid prescription drugs increased by 47% between 2017 and 2022 (from $29.8 billion to $43.8 billion) and net spending per prescription increased from $39 to $58 between 2017 and 2022. Growth in prescription drug rebates was slower than gross spending growth between 2017 and 2022.

Studies have found substantial drug price increases beyond the rate of inflation in recent years as well as increasing launch prices for new drugs.

As a result, various federal actions have sought to address high prescription drug costs. This includes new threats from the Biden administration to license certain patents for costly drugs developed with government research funding to other drug makers, and the passage of the Inflation Reduction Act. In Medicaid, cost containment efforts have also recently emerged in proposed legislation to regulate pharmacy benefit managers, including the House’s newly passed Lower Costs, More Transparency Act, and a new proposed federal rule with provisions that increase price transparency.

Over two-thirds of states also reported new or expanded initiatives to contain prescription drug costs in KFF’s annual survey of state Medicaid programs.

Even if national utilization trends remain relatively stable, as they have in recent years as states unwind the continuous enrollment provision, loss of Medicaid coverage on an individual level could have severe consequences. In a recent KFF focus group report, Medicaid participants said that losing health insurance would be “devastating” due their need for “lifesaving” prescriptions and treatments.