Revisions to Medicaid Rx Drug Program
On January 21, the U.S. Centers for Medicare and Medicaid Services (CMS) finalized a reform of the rebate and reimbursement systems for Medicaid prescription drugs, designed to save federal and state governments an estimated $2.7 billion over five years. It was the latest step in the agency’s ongoing actions to contain healthcare costs, which have been rising at a slower pace in recent years.
In December, the agency released a study indicating that overall health spending grew by 5.3 percent in 2014. In addition, consumer out-of-pocket spending grew by only 1.3 percent in 2014, as compared to 2.4 percent growth in 2013, reflecting the increased number of individuals with health coverage after passage and implementation of the Affordable Care Act (ACA). An estimated 6.3 million newly eligible enrollees were added to Medicaid in 2014.
CMS’s new “Covered Outpatient Drugs” final rule establishes a long-term framework for implementation of the Medicaid drug rebate and reimbursement programs. The new definitions detailed in the rule are designed to ensure that Medicaid rebates accurately account for market prices, maximizing taxpayer savings. The rule will also incentivize pharmacies to utilize generic drugs and provide governments with additional tools to manage Medicaid drug costs.
“Millions of Medicaid beneficiaries rely on prescription medications to manage chronic illnesses or treat acute conditions,” said Vikki Wachino, CMS deputy administrator and director of the Center for Medicaid and CHIP Services. “But recently, the cost of prescription drugs has been rising rapidly, creating fiscal pressure and potentially compromising beneficiary access. This final rule makes changes that will save taxpayers billions and ultimately improve beneficiary access to prescription drugs.”
Retail prescription drug spending accelerated in 2014, growing 12.2 percent to $297.7 billion, compared to 2.4 percent growth in 2013, according to the CMS study. That rapid growth was due to increased spending for new medicines (particularly for specialty drugs such as those used to treat hepatitis C), a smaller impact from patent expirations, and price increases for brand-name drugs. Private health insurance, Medicare, and Medicaid spending growth for prescription drugs all accelerated in 2014.