Squeezing the balloon

The growth in US pharmaceutical expenditures in recent years has consistently outpaced that of total healthcare spend by several percentage points.

With the publication of its recent Blueprint, the U.S. Department of Health and Human Services has turned the spotlight on the rising drug prices and proposes a series of actions to stem cost growth through improved competition, a better negotiation position for purchasers, lower list prices and lower out-of-pocket costs.

In Medicaid, the cost of prescription drugs is growing at even faster than national rates. In the same year (2014) that national prescription spending increased by 12.2%, drug spend in Medicaid ballooned by double that: 24.3%. With pressure on states to control healthcare cost growth only likely to increase, curtailing the continuous progression of pharmaceutical costs has become a key priority for many state administrations.

This paper explores a series of strategies that state Medicaid programs could consider to curb the growth in pharmaceutical spending. The strategies are a mix of changes to existing approaches and new ideas based on leading practice examples from the US as well as globally.