Issues

Medicaid

GPhA Position

GPhA member companies play a significant role in providing prescription medicines to the 45 million Americans receiving Medicaid benefits. Approximately 60% of all drugs dispensed through the Medicaid program are generic, costing on average 63% less per prescription than the corresponding brand and saving the Medicaid program tens of billions of dollars each year. GPhA works with federal and state governments to implement policies that promote increased generic use, thereby achieving greater savings.

Key Points

keypoint-pills_13.jpg

Even with federal support, states report they are struggling to meet their share of expanding Medicaid costs. On average, Medicaid consumes about 20% of a state's budget. However, some states, such as Maine, are spending as much as 31% percent of their annual budgets on Medicaid.

keypoint-pills_10.jpg

States can save hundreds of millions of dollars each year through the use of generic medicines in their Medicaid programs. For example, Texas saved more than $223 million simply by changing its prescription pads, making it easier for doctors to prescribe generics.

keypoint-pills_9.jpg

Nationally, Medicaid covers 59 million low-income Americans, including families, people with severe disabilities, and low-income Medicare beneficiaries known as "dual eligibles." Total Medicaid spending on health care services and prescription drugs totaled approximately $339 billion in 2006.

Background

As a result of increasing prescription drug costs, State Medicaid programs have implemented a variety of cost-containment mechanisms in their drug programs over the past few years. These mechanisms have allowed states to reduce their pharmacy expenditures while also ensuring that patients can get the medicines they need. While not all states have yet taken full advantage of the benefits generics offer Medicaid, the potential for greater cost-savings has prompted 39 states to require generic substitution to Medicaid beneficiaries when generics are available. Under these mandatory generic substitution policies, the brand name drug remains available to beneficiaries through the use of "prior authorization" by the prescribing physician.

In addition to generic substitution laws, states can implement redesigned prescription pad forms to require a prescribing physician to do more than simply check a box on the script pad in order to override generic substitution.

Related Information

Letters

October 25, 2005 - GPhA Letter to Senate Finance Committee Chairman Grassley on pharmacy reimbursement

October 24, 2005 - GPhA Letter to Senate Finance Committee Chairman Grassley on supplemental rebates

August 3, 2004 - GPhA Letter to CMS Outlining Medicaid Cost-Saving Practices

Testimony & Content

September 9, 2004 - Centers for Medicare and Medicaid Services -- Safe and Effective Approaches to Lowering State Prescription Drug Costs: Best Practices Among State Medicaid Drug Programs (41.21KB PDF)

Other

July 26, 2010 - National Brand and Generic Prescription (Rx) Medicaid Drug Utilization and Expenditures by State in 2009 Q1 - Q4 (61.06KB PDF)

February 15, 2009 - Centers for Medicare and Medicaid Services Web Site

September 9, 2004 - Centers for Medicare and Medicaid Services -- Safe and Effective Approaches to Lowering State Prescription Drug Costs: Best Practices Among State Medicaid Drug Programs (41.21KB PDF)