Medicaid's Most Costly Outpatient Drugs

The launch of several expensive hepatitis C drugs over the past few years has ushered the topic of high cost prescription drugs back into the public’s and policymakers’ attention. With over 70 million beneficiaries, many of whom have complicated health needs, Medicaid is one of the largest providers of prescription drugs in the United States. State Medicaid agencies have a variety of mechanisms to help control outpatient drug spending that they have been using widely for the past decade. However, new prescription drugs are always coming to market, and the health needs of the Medicaid population change over time, especially as enrollment grows because of ACA Medicaid expansion. As a result, it is helpful for policy makers to understand which drugs used by the Medicaid program are most expensive. In this issue brief, we determine the 50 most costly drugs before rebates used by the Medicaid program from January 2014 through June 2015. We then examine reasons why these drugs are so costly, as well as exploring case studies on opioids, hepatitis C drugs, and the drug Abilify. Key findings include the following:

  • Among the most commonly prescribed outpatient prescription drugs in Medicaid, the top five drugs are used for pain relief (hydrocodone-acetaminophen and ibuprofen), management of chronic illness (lisinopril and omeprazole), and antibiotics (amoxicillin). However, these drugs are not necessarily among the most costly used by Medicaid as many are inexpensive at the per prescription level.
  • Several drugs that are very costly at the per prescription level reflect Medicaid’s role in caring for individuals with substantial health needs. These include drugs to treat hemophilia (NovoSeven RT, Koate-DVI, Feiba), multiple sclerosis (HP Acthar), and rare infant diseases (Adagen). However, most of these drugs are not commonly used among the Medicaid population.
  • Aggregate drug costs to Medicaid reflect both frequency of use and per prescription cost. Among the most costly drugs in aggregate used by the Medicaid program are drugs used to treat costly illnesses for which Medicaid is a key source of coverage, including behavioral health conditions (Abilify and Vyvanse), hepatitis C (Sovaldi and Harvoni), and HIV (Truvada). Nearly three quarters of the 50 most costly drugs fall into five drug groups, the most prevalent of which is antivirals, which includes drugs used to treat HIV as well as hepatitis C drugs.
  • 45 of the 50 most costly drugs fall into the high-cost category in part or primarily because they are frequently prescribed. Hydrocodone-acetaminophen and Suboxone, both opioids, a drug group which has garnered much public attention recently, fall into this category, as do several drugs used to treat ADHD.
  • Many of the most costly drugs have some form of regulatory and consequently market exclusivity, thus enabling the manufacturers to charge a premium price for the drug at the prescription level. Twenty-two of the most costly drugs are particularly expensive at the prescription level, including the most costly drug before rebates used by Medicaid over this period, Abilify (an atypical antipsychotic).

As states continue to implement an array of measures to control Medicaid prescription drug costs, they are challenged to balance costs with access to drugs needed by beneficiaries. This challenge is not unique to Medicaid alone but is a common issue throughout the U.S. healthcare system, as reflected by the attention in general given to the high cost of prescription drugs. While this analysis may not reflect Medicaid’s net expenditures for a particular drug, as it is unable to account for drug rebates, it provides insights into which drugs are driving Medicaid prescription drug expenditures and why.

Issue Brief

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