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Health Care Costs and Financing

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Medicaid spending on outpatient drugs more than doubled in recent years

Medicaid spending for outpatient prescription drugs increased by 20 percent per year on average from 1997 to 2002, jumping from $11.6 billion to $23.7 billion during that period, according to a new study by Agency for Healthcare Research and Quality researchers. Jessica S. Banthin, Ph.D., and G. Edward Miller, Ph.D., from the Division of Modeling and Simulation, Center for Financing, Access and Cost Trends, analyzed data from the Medical Expenditure Panel Survey linked to a prescription drug therapeutic classification system to examine trends between 1996/1997 and 2001/2002 in utilization and expenditures for Medicaid enrollees.

The increase reflects a rise in both the number of prescriptions written for Medicaid enrollees—from 301 million in 1997 to 429 million in 2002—and the rapid uptake of newer classes of drugs, which are often more expensive. The increase also reflected rapidly growing spending on behalf of disabled adults, including low-income people with serious mental illnesses.

Prescriptions for newer classes of drugs included antidepressants, COX-2 inhibitors, proton pump inhibitors, and cholesterol-lowering medications. For example, the number of Medicaid enrollees taking antidepressants rose by 50 percent—from 2.5 million enrollees in 1997 to 3.7 million in 2002—which helped fuel a 130- percent rise in Medicaid spending for those drugs during the period. Antidepressants and all other psychotherapeutic drugs constituted the largest category of drugs prescribed to Medicaid enrollees in 2002, and total spending for all psychotherapeutic drugs rose 127 percent between 1997 and 2002.

In addition, annual Medicaid spending on drugs for disabled adults ages 19 to 64 grew 97 percent during the period—from $5.3 billion in 1997 to $10.3 billion in 2002—while drug spending for all Medicaid enrollees 65 and older rose 81 percent, from $3.5 billion to $6.3 billion. Furthermore, disabled adults accounted for 47 percent of the Medicaid enrollees who were prescribed antidepressants—an increase of 37 percent between 1997 and 2002. The data do not include spending on drugs given to Medicaid patients while hospitalized or those in nursing homes.

Other leading categories of drugs, by overall expenditures, were cardiovascular drugs, including ACE inhibitors, beta blockers, antihypertensive combinations, and diuretics; hormones; respiratory drugs; analgesics; gastrointestinal drugs; and antibiotics. Use and expenditures for all these drugs increased substantially during the period.

For more information, see "Trends in Prescription Drug Expenditures by Medicaid Enrollees," by Drs. Banthin and Miller in the May 2006 Medical Care 44(5 Suppl), pp. I-27-35. Reprints (AHRQ Publication No. 06-R040) are available from the AHRQ Publications Clearinghouse.

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