Fifth in a series of briefs on the future of children’s health care coverage
Introduction
Prescription drugs are essential for the health of tens of millions of low-income children enrolled in Medicaid. They not only are part of routine pediatric care but also provide critical treatment and maintenance for chronic conditions such as asthma and attention deficit hyperactivity disorder, illnesses like childhood cancers, serious behavioral health issues, and rarer conditions such as cystic fibrosis and spinal muscular atrophy.[note]Jack Hoadley and Joan Alker, “How Medicaid and CHIP Shield Children from the Rising Costs of Prescription Drugs” (Washington:Georgetown University Center for Children and Families, July 2017), available at https://ccf.georgetown.edu/wp-content/uploads/2017/07/Prescription-drugs-v3-link-fix.pdf.[/note]
The Medicaid Drug Rebate Program (MDRP) is highly successful in significantly reducing state Medicaid prescription drug costs, while ensuring access to needed prescription drugs for low-income children, families and other beneficiaries who rely on Medicaid today. It is achieving the intent of the drug rebate program, when it was enacted in 1990, to make prescription drugs much more affordable for state Medicaid programs and low-income beneficiaries by ensuring that Medicaid gets among the largest discounts, and thus among the lowest effective prices, available to any payer. Medicaid obtains rebates that are far larger than those in Medicare Part D and in private insurance.
Yet, while net prescription drug costs constituted only 5.4 percent of total Medicaid benefit spending in 2016 and annual Medicaid prescription drug cost growth has significantly moderated since 2014, overall prescription drug costs are expected to continue to increase at a faster rate than other health care goods and services over the next decade due in large part to continued specialty drug cost growth, according to the Medicaid and CHIP Payment and Access Commission (MACPAC).[note]Medicaid and CHIP Payment and Access Commission, “Chapter 1:Improving Operations of the Medicaid Drug Rebate Program, June 2018 Report to Congress” (Washington: Medicaid and CHIP Payment and Access Commission, June 2018), available at https://www.macpac.gov/wp-content/uploads/2018/06/Improving-Operationsof-the-Medicaid-Drug-Rebate-Program.pdf. According to the Office of the Actuary at the Centers for Medicare and Medicaid Services, Medicaid retail prescription drug costs increased by 3.1 percent in 2017, as compared to 5.0 percent in 2016, 11.6 percent in 2015 and 23.9 percent in 2014. The rapid increases in 2014 and 2015 were driven largely by the market entry of new drugs treating Hepatitis C. See Office of the Actuary at the Centers for Medicare and Medicaid Services, “Table 16: Retail Prescription Drug Expenditures” (Washington: Office of the Actuary at the Centers for Medicare and Medicaid Services, December 2018), available at https://www.cms.gov/ Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html.[/note] As a result, to better help state Medicaid programs address these rising drug costs and ensure continued access to needed prescription drugs for low-income Medicaid beneficiaries such as children and families, federal and state policymakers should take sound steps to improve and strengthen the Medicaid Drug Rebate Program, but not do anything to weaken or undermine it.
Full Report
Download and read the full report.
Additional Resources
Archived Webinar: Helping State Medicaid Programs Better Address Rising Drug Costs
Blog: New CCF Issue Brief on Strengthening Effective Medicaid Drug Rebate Program