The Build Back Better Act (BBBA) includes several prescription drug provisions; while much of the focus has been on Medicare and private insurance, the bill includes a number of provisions with implications for Medicaid prescription drug spending. Before the pandemic, Medicaid outpatient prescription drug utilization, measured in terms of the number of prescriptions, was decreasing while Medicaid gross spending on prescription drugs was increasing. COVID-19 and social distancing practices changed health care needs and utilization, in turn impacting Medicaid prescription drug utilization and spending in 2020. Further, Medicaid enrollment has increased throughout the pandemic, which could influence Medicaid prescription drug trends. This issue brief describes Medicaid prescription drug utilization and spending trends in calendar year 2020 compared to previous years to explore how the pandemic impacted Medicaid prescription drug utilization and spending. This brief builds on a previous KFF analysis of Medicaid prescription drug trends using the most recent data available.
Medicaid outpatient prescription drug utilization decreased during the pandemic. Overall, there were a total of 703.6 million Medicaid outpatient prescriptions in 2020, which is down from 734.1 million prescriptions in 2019 (Figure 1). While outpatient prescription drug utilization started to decline even before the pandemic, the decline from 2019 to 2020 (4.2%) was greater than the decline from 2018 to 2019 (0.8%). Immediately following the onset of the COVID-19 pandemic, Medicaid prescription drug utilization dropped in the second quarter (April – June) of 2020, experiencing a 10.1% decrease in prescription drug utilization compared to the same quarter in 2019 (Figure 2). Utilization was higher in the third and fourth quarters of 2020, but still below 2018 and 2019 levels. This decrease in outpatient drug utilization occurred as Medicaid enrollment increased by 12.5% between February 2020, right before the pandemic began, and December 2020.
Prescription drug utilization trends varied across drug groups in 2020. The same drug groups comprise the top ten most prescribed drug groups in 2019 and 2020, but the order changed (Table 1). Among the top ten most prescribed drug groups in 2020, seven experienced declines in utilization and three experienced increases. Drug groups that saw large utilization declines from 2019 to 2020 compared to 2018 to 2019 included antibiotics, allergy immunotherapy and antihistamines, sympathomimetic agents, and adrenals and combinations. Further, analgesics/antipyretics, which include opioids, were declining before the pandemic and continued to decline in 2020. On the other hand, three drug groups, psychotherapeutics, anticonvulsants, and antidiabetic agents, saw increases in drug utilization from 2019 to 2020, which could be due to the routine nature of the drugs that comprise these groups. Psychotherapeutic agents were the most prescribed drug group in 2020 and experienced a 4% increase in utilization, which mirrors national trends and the increase in mental health challenges throughout the pandemic.
Gross Spending Trends
While utilization declined, Medicaid spending on outpatient prescription drugs before rebates increased in 2020. Overall, Medicaid paid $73.4 billion before rebates for outpatient prescription drugs in 2020, which is up from $69.1 billion in 2019 (Figure 3). Medicaid gross spending on prescription drugs increased 9.8% from 2018 to 2019 compared to 6.2% from 2019 to 2020, indicating spending increases may have slowed somewhat due to the pandemic. Immediately following the onset of the COVID-19 pandemic, the second quarter (April – June) of 2020 saw the lowest spending, which mirrors the dip in utilization in the same quarter, though Q2 2020 spending was still above Q2 spending in previous years (Figure 4). Gross spending rebounded and was higher in the third and fourth quarters of 2020 than in the first quarter of 2020.
Gross Medicaid spending continued to increase for almost all of the most costly drug groups before rebates in 2020. The same drug groups comprise the top ten most costly drug groups before rebates in 2019 and 2020, but the order changed (Table 2). Antivirals were consistently the most costly drug group in Medicaid before rebates from 2015 to 2019, driven by spending for drugs used to treat HIV and hepatitis C drugs; however, antiviral spending declined from 2019 to 2020 and antidiabetic agents became the most costly drug group before rebates in 2020. While not in the top 10 most costly drug groups, respiratory agents, a drug group used to relieve and treat respiratory diseases such as COVID-19, experienced a 61% increase in gross spending and a 44% increase in utilization from 2019 to 2020.
Despite remaining stable in prior years, net Medicaid prescription drug spending, or spending after rebates, increased in federal fiscal year 2020. While gross Medicaid spending on outpatient prescription drugs increased from 2015 to 2019, rebates also increased during the period, leaving Medicaid net spending in 2019 almost the same as net spending in 2015. However, recent data for the federal fiscal year (FFY) 2020 (October 1, 2019 – September 30, 2020) shows rebates for Medicaid prescription drugs increased by $2.1 billion from FFY 2019 while Medicaid gross spending increased by $3.6 billion, leading to an increase in net Medicaid spending in FFY 2020.
There are many factors that may have contributed to the decline in prescription drug utilization during the pandemic, including decreases in service utilization, drug adherence, and the diminished spread of illnesses other than COVID-19. Following the onset of the pandemic, there was a drop in emergency department visits, hospital admissions, preventive service utilization, and elective health services. The use of telemedicine increased, but it did not increase enough to make up for the decline in in-person visits. Declines in health care utilization likely led to fewer clinicians writing prescriptions, thus contributing to the decline in Medicaid prescription drug utilization. Additionally, a recent study found US patients were more likely to discontinue use of chronic medications during the pandemic and less likely to begin new medications, signaling changes in drug adherence could have contributed to the decline. Declines across specific drug groups also likely reflects the decline medical service utilization during the pandemic and the impact of COVID-19 mitigation measures. Social distancing lessened the spread of other illnesses, such as the flu, which saw sharp declines in cases and deaths during the pandemic. Antibiotics saw the largest decline (-23%) in utilization from 2019 to 2020 (Table 1), likely due in part to fewer bacterial infections during the pandemic.
Medicaid prescription drug utilization declined at time when Medicaid enrollment was increasing. Administrative data for Medicaid show that after declines in enrollment from 2017 through 2019, total enrollment nationwide began to grow after February 2020, right before the pandemic began. By December 2020, enrollment had increased by 8.9 million, or 12.5%, from actual enrollment in February 2020. The overall number of prescriptions per enrollee per year decreased from approximately ten prescriptions per person in 2019 down to nine in 2020.
While prescription drug utilization decreased during the pandemic, Medicaid spending before rebates increased. Overall, 2020 continued with the same utilization and spending trends seen before the pandemic in 2019, but utilization decreased to a larger degree and spending increased to a smaller degree in 2020 compared to 2019. All drug groups in both the top 10 for utilization and gross spending, saw larger growth in their gross spending than in utilization from 2019 to 2020, which contributes to the increase in spending despite declines in utilization overall. Further, increases in gross spending despite decreases in utilization in 2020 may be due in part to decreased use of less costly drugs. For example, antibiotics experienced a 23% decline in use from 2019 to 2020 (Table 1), but antibiotics only made up 2% of gross spending in 2020. Also, despite the pandemic, the number of new drug approvals remained high in 2020, likely contributing to the increase in spending despite decreases in utilization.
Medicaid prescription drug policy is likely to remain an issue at both the federal and state levels due to budgetary constraints and the entry of new, high-cost drugs to the market. States remain concerned about specialty and high-cost drugs and report developing strategies and policies to address these drugs. Though much of the focus on the Build Back Better Act (BBBA), recently passed by the House of Representatives and currently being debated in the Senate, has been on Medicare and private insurance prescription drug provisions, the BBBA includes a number of provisions that affect Medicaid prescription drug spending. The BBBA would require retail community pharmacy participation in the National Average Drug Acquisition Cost (NADAC) survey, which could better align pharmacy reimbursement rates with pharmacy actual costs. The BBBA prohibits the implementation of a rule issued by the Trump Administration estimated to increase federal and state Medicaid spending. The rule would have eliminated rebates negotiated between drug manufacturers and pharmacy benefit managers (PBMs) or health plan sponsors in Medicare Part D by eliminating the safe harbor protection under the federal anti-kickback law. The BBBA also proposes to apply the Medicaid Drug Rebate Program to separate state CHIP programs, likely allowing state CHIP programs to receive larger rebates. Lastly, there may be implications for Medicaid prescription drug spending resulting from Medicare proposals in the BBBA that allow the federal government to negotiate prices for some high-cost drugs and implement an inflationary rebate for some drugs under Medicare Part B and Part D.