Meredith Delk, Ph.D., MSW Senior Vice President, General Manager, Government Markets
Juanita Chapman Director, Analytics
Kristen Haloski, Pharm.D., AAHIVP Senior Director, Government PDL Markets
Kristin Haas Manager, Analytics
Katie Lockhart, MS Manager, Forecasting and Pharmacoeconomics
Karim Prasla, Pharm.D., MS, BCPS
Vice President, Clinical Outcomes, Advanced Analytics, and Research
Maryam Tabatabai Vice President, Clinical Information
Billy Thomas Senior Vice President, PDL and Drug Rebate Operations
Eileen Zimmer, Pharm.D., MBA Senior Director, Government PDL Markets
EXTERNAL CONTRIBUTOR
Doug Brown, R.Ph., MBA Senior Vice President, Value and Access Coeus Consulting Group
INTRODUCTION
Magellan Rx Management is excited to present the 7th edition of the Medicaid Pharmacy Trend Report. This annual publication ofers insight into the gross and net drug spend trend across Medicaid programs.
As the nation emerges from intense management of COVID-19, states and Medicaid agencies will again focus their eforts on other pressing issues in the coming years, including paying for curative therapies and high-cost drugs, addressing the opioid epidemic and challenges with mental health resources, and reducing the incidence of infectious disease. 2021 was a dynamic year for our Medicaid space. We saw the overall trend hit double digits for the frst time in the history of the Medicaid Pharmacy Trend Report. As we look ahead, we predict this trend to mitigate as the launches of key biosimilars and generics accelerate.
For the second year in a row, we saw specialty drugs account for more than half of total drug spend, while still only accounting for 1.3% of pharmacy utilization. While we have seen similar top drug spend classes in previous years, vaccines — namely those for COVID-19 — is now a top 50 net spend class. Although COVID relief funds have covered many of these expenses to this point, the future management and state responsibility for these products remains to be seen.
In 2021, states continued to explore and implement eforts to counterbalance the increasing cost of specialty drugs with unique payment models, including subscription and outcomes-based contracting models. Each year, additional Medicaid programs have taken the necessary steps to gain CMS approval for these arrangements, and outcomes-based contracting remains a common
theme when states convene at Medicaid Pharmacy Administration Meetings. These approaches, while still early in their lifecycle, are critical tools that states must use if they want to move the conversation away from volume to toward value.
In this year’s report, we once again track the top classes and individual drugs by spend and those driving trend, with a deep dive into the top 10 classes driving trend that highlights why those classes had the largest impact on the Medicaid program. New this year, we have ranked the top 50 classes by percent of net spend while comparing 2020 to 2021. This view provides the reader with a more global view of the classes that are impacting the Medicaid drug spend.
The Medicaid Pharmacy Economics section, included in every issue of this report, provides a foundational background for new readers and those needing a refresher on the calculus of the federal rebate and the impact rebates have on the net price of drugs in the Medicaid program.
Thank you for your continued interest in the Medicaid Pharmacy Trend Report. We are confdent the information contained in this report will drive important conversations and strategic opportunities to assist in managing Medicaid pharmacy programs in the coming years.
The top drug classes in Medicaid programs across the country remained almost identical as previous years. The top two drug classes remained HIV/AIDS and antipsychotics, accounting for 18.4% of the total net drug spend and, similar to last year, the top 5 classes accounted for almost 40% of total net spend.
FIGURE 1: 6-YEAR NET COST PER CLAIM TREND 2016-2021
FIGURE 2: TOP 5 CLASSES BY NET SPEND 2021*
Overall Trends
Overall Drug Cost Trends
In 2021, there was a 9.4%, or $12.24, increase in the gross cost per claim and a 11.0%, or $5.81, increase in the net cost per claim. As in the previous two years, 2021 saw another 2-plus percentage-point increase in the specialty trend, which topped out at 13.0%, up from 10.9% in 2020. Traditional drug net trend broke its long negative streak in 2020, lifting 2.1 percentage points from the previous year to inch into the positive at 1.9%. 2021 brought the trend to 5.8%, up 4.1 percentage points from 2020. Taken together, the traditional and specialty trends drove a double-digit overall trend (11%) for the frst time since the inception of this report.
FIGURE
FIGURE 5: GROSS COST PER CLAIM
FIGURE 6:
KEY TRENDS AND INSIGHTS
Traditional vs. Specialty Impact
Last year we reported that, as predicted, specialty net cost exceeded 50% of total net drug spend in Medicaid fee-for-service. This year, that growth has accelerated, growing 2.3 percentage points, from 51.5% in 2020 to 53.8% in 2021. Consistent with previous years, specialty utilization was again just 1.3% of total utilization.
The Medicaid pharmacy pricing landscape remains largely unchanged over the six years Magellan Rx has produced this report. The basic tenet of the program is the same: Manufacturers agree to a base (or “federal”) rebate in exchange for mandatory pharmacy coverage for their products by states that provide the Medicaid pharmacy beneft. All states and the District of Columbia currently ofer this beneft to Medicaid recipients. Hence, manufacturers gain “payable” status everywhere through this agreement with the Centers for Medicare and Medicaid Services (CMS). Medicaid rules also permit additional, or “supplemental,” rebates to be contracted by individual states or a group of states to further reduce the net cost of pharmaceuticals. These contracts are protected by Medicaid’s best price exemption, which means they do not impact the manufacturer’s Medicaid best price. The pharmacy beneft is included in the Federal Medical Assistance Percentage (FMAP), so states share supplemental rebates as they do federal rebates with the federal government. The other rebate factor in the equation, the rebate ofset amount, continues to go entirely to the federal government and constitutes a small portion, roughly 2.4%, of total drug spend. In 2021, the average total discount inclusive of ROA was 58.8% (52.9% federal and 5.9% supplemental).
» Net drug cost is calculated net of federal, supplemental, and the rebate ofset amount.
» States do not chase supplemental rebates at the expense of lowest net cost or federal rebates.
» Brand drugs can be less expensive than their generic equivalents and can save states millions of dollars annually.
The Economics
To understand Medicaid economics at the drug level, assume pharmacy reimbursement, wholesale acquisition cost (WAC), and average manufacturer price (AMP) are all the same. A new brand drug enters the market with a minimum mandatory rebate of 23.1% of AMP. This drug enters a competitive class with three clinically equivalent therapeutic alternatives, each with higher discounts and lower net costs than the new drug. With a pharmacy reimbursement cost of $100, the net cost to the state is $76.90 ($100 minus 23.1%, or $23.10). To be competitive, the manufacturer of the new brand will ofer an additional discount, known in Medicaid as a “supplemental rebate,” to lower the net
cost from $76.90 to a competitive price of $50. The value of the supplemental rebate at time zero is thus equal to $26.90 and the total discount is 50%, or $50. As time progresses, manufacturer pricing actions drive the total discounts up. Still, due to the inverse relationship between supplemental and federal rebates, supplemental discounts decline over time as the total federal discount increases (see fgure 11). As the patent expiration approaches, the manufacturer generally increases the cost of the drug, and the CPI-U penalty accelerates the growth of the federal rebate in the quarters just prior to that event.
Key Points in Medicaid Economics
FIGURE XX: MEDICAID PHARMACY ECONOMICS
Generic Impact
In the months and even years after patent expiration, brand drugs can be signifcantly less expensive to states than their generic counterparts net of all federal rebates. States that opt to take advantage of a brand less than generic strategy save millions of dollars each year. In 2021, states included in this report saved $486 million, or $74.74 per claim, using a brandover-generic strategy. The top fve brand-over-generic drugs — Symbicort, Suboxone, Proair HFA, Concerta, and Advair Diskus — accounted for 65% of total brand-over-generic savings.
Generic Utilization Rate
Medicaid fee-for-service (FFS) programs most often reported lower generic utilization rates than Medicaid MCO or other commercial programs due to the impact of the federal rebate on the net cost of brand drugs compared to their generic equivalents. The CMS calculation of generic efciency requires states to classify brand and generic drugs not by their formal label name, but by their CMS drug class indicator. These indicators are single-source, innovator multisource, or noninnovator multisource. The impact to FFS is signifcant because authorized generics (AGs) that have a non-innovator multisource (generic) label name pay an innovator multisource (brand)
Medicaid Forecasting
MRx Predict is Magellan Rx Management’s advanced analytics platform supporting various predictive analytics solutions. Predictive Medication Adherence and Predictive Opioid Misuse tools proactively identify at-risk patients and individually stratify them based on the probability of being nonadherent to chronic medications or misusing opioid therapies, respectively. Medicaid forecasting data can be found on page 16
Our Drug Cost Planner tool provides predictions on drug spend and trend while also detailing the factors driving those future trends, allowing clients to prepare for future events such as pipeline launches and patent expirations. Drug Cost Planner predicts that overall gross trend will drop precipitously next year and then remain relatively constant over the next several years, trending between 3.0% and 3.5%. Overall net cost will have peaked in 2021 at 11.0% and is predicted to drop to 6.2% next year and then trend between 3% and 4% through 2023 and 2024. Rebates will continue to help ofset increasing drug prices, but the full impact of infation on the CPI-U component of the federal rebate will not be seen until next year’s report.
federal rebate and are thus counted as brand drugs by CMS. In 2021, states averaged an 86.0% efective generic dispensing rate (GDR) when defned as drugs that do not have a proprietary drug name and where Authorized Generics count as generic even though they pay a brand like CMS rebate.
FIGURE 12: GENERIC UTILIZATION
FIGURE 13:
Federal Rebate Update
2021 saw a signifcant decrease in the aggregate federal rebate percentage inclusive of the rebate ofset amount (ROA), from 54.5% in 2020 to 52.9% in 2021. This is a continuation of a trend we identifed two years ago, after several years of increases to the federal rebate. The decline, which was driven by new specialty drugs, was signifcantly ofset by a corresponding 1.5% rise in specialty supplemental rebates. On closer inspection, the federal rebate on traditional drugs increased just 0.1 percentage point in 2021, compared to 2020’s 1.9 percentage-point increase, while the federal rebate on specialty drugs continued to decline, falling another 3.9 percentage points from 46.1% down to 42.2%, following 2020’s 2.6 percentage-point decline. Considering new drugs to market start with a federal rebate of 23.1% of AMP, higher utilization of newer products is likely pulling down the average specialty federal rebate. Given the growth in specialty spend, up 2.3 percentage points, we anticipated the continued decline in total rebate but expected it to be on par with previous years. However, 2021 saw the total rebate, net of federal, supplemental, and ROA, fall 1.6 percentage points year over year — a dramatic decline from previous years.
Not included in this discussion is the impact of the CPI-U penalty on the calculation of the Federal rebate. It is beyond the scope of this report to calculate the direct impact of the CPI-U on the overall federal rebate, but with infation running at more than 7% in 2021, according to the Federal Reserve Bank of St. Louis, it would be hard to imagine that a higher CPI-U would not translate to a lower federal rebate.
On a positive note, total supplemental rebates, driven by specialty drugs, increased a full 1 percentage point from 4.9% to 5.9% as a percent of gross spend. Remember, supplemental rebates have an inverse relationship to the federal rebate when contracted at a guaranteed net unit price or GNUP. Supplemental rebates are collected on top of the mandatory federal rebate bringing the total Medicaid rebate (inclusive of ROA) to 58.8%, which is just 0.6 percentage points lower than last year.
FIGURE 14: FEDERAL REBATE PERCENTAGE BY SEGMENT
The average federal rebate can be subdivided as either specialty and traditional drugs or brand and generic drugs. As noted earlier, the growth in specialty net spend was the primary driver of lower average federal rebate in 2021.
*Federal rebate as a percent of pharmacy reimbursement and net of ROA
CLASS AND DRUG TRENDS
Therapeutic Class Net Dollar Impact
Cytokine and CAM antagonists and hemophilia treatment were the two classes with the highest net dollar impact against the 2021 trend, adding $0.93 and $0.61, respectively. Surprisingly, immunomodulators, atopic dermatitis emerged as a trend driver for states by adding $0.40 while moving from 2020’s 15th-most expensive class to 2021’s 10th-most expensive class over the period. Antivirals, oral and stimulants and related agents saw the largest decreases in net trend — -$0.17 and -$0.08, respectively — helping to mitigate the overall increase in net trend, which has now reached double-digits for the frst time since this report’s inception. These key therapeutic classes are discussed in greater detail starting on page 11
Drug Net Spend Impact
When looking at individual net drug spend as a percent of total net spend, six specialty drugs and fve traditional drugs each account for more than 1% of total net drug spend. Together, these 11 drugs account for 21.9% of total net drug spend or $1.2B of the $5.6B total net spend.
FIGURE 15: TOP 5 CLASSES WITH INCREASING TOTAL NET SPEND BY DOLLAR IMPACT 2021
Traditional Specialty
FIGURE 16: TOP 5 CLASSES WITH DECREASING TOTAL NET SPEND BY DOLLAR IMPACT 2021
FIGURE 17: 2021 TOP 10 SPECIALTY DRUGS BY PERCENT OF TOTAL NET SPEND
FIGURE 18: 2021 TOP 10 TRADITIONAL DRUGS BY PERCENT OF TOTAL NET SPEND
CLASS AND DRUG TRENDS
2021 Top 10 Traditional and Specialty Drugs Driving Trend by Net Dollar Impact Change
The specialty class had a higher per-drug impact than traditional, with six of the top 10 specialty drugs — Hemlibra, Trikafta, Evrysdi, Biktarvy, Stelara, and Ibrance — having a higher drug trend than Vraylar on the traditional side. Four of the top six specialty drugs belong to key therapeutic classes that had a positive net dollar impact and will be discussed further in the next section.
FIGURE 19: TOP 10 TRADITIONAL DRUGS INCREASING DRUG TREND
FIGURE 21: TOP 10 SPECIALTY DRUGS INCREASING DRUG TREND
FIGURE 20: TOP 10 TRADITIONAL DRUGS DECREASING DRUG TREND
FIGURE 22: TOP 10 SPECIALTY DRUGS DECREASING DRUG TREND
CLASS AND DRUG TRENDS
KEY THERAPEUTIC CLASSES BY NET DOLLAR IMPACT
Cytokine and CAM Antagonists
Hemophilia
Class Summary
Cytokine and cell adhesion molecule (CAM) antagonists was the No. 6 net spend category in 2021 and had the largest impact to net cost per claim. Net dollar impact was driven by Stelara syringe, which had a 35.3% increase in claim volume accounting for a $0.36 net dollar impact, while the Humira pen kit continued to capture the largest market share.
Hemophilia was the No. 3 net spend category in 2021 and has maintained this rank annually since 2017. Net dollar impact went from negative in 2020 to $0.61 in 2021 and was driven by Hemlibra, which continues to have the largest market share in the class and utilization, which increased 41.3% from 2020 to 2021.
Immunomodulators, atopic dermatitis emerged as a positive trend driver and was 2021’s No. 10 net spend class. Positive net dollar impact can be attributed to increased utilization and market share of the Dupixent pen and syringe, with shifts away from Eucrisa, Elidel, and its authorized generic.
Dupixent Pen (SQ) Tacrolimus (topical) Pimecrolimus (AG) (topical) Other
Class Summary
Spinal muscular atrophy was the No. 13 net spend class in 2021. Although there are only three products in the class, claim volume increased by 425%, driven by the oral product Evrysdi, which had a large increase in utilization, and a shift in market share away from Spinraza.
FIGURE 27: MARKET SHARE AND NET DOLLAR IMPACT
Evrysdi (oral) Spinraza (IT) Zolgensma (IV)
FIGURE
Cystic Fibrosis, Oral
Anticoagulants, Oral
Class Summary
Cystic fbrosis, oral, was the No. 5 net spend class and the No. 5 positive trend driver in 2021. There was an 11% increase in claim volume due to a 27% increase in utilization of Trikafta, which has the majority of market share in the class.
Anticoagulants, oral, was the ffth-largest negative net trend driver in 2021. The net cost per claim for agents in this class decreased by 35.2%, while the claim volume increased by 1.4%.
Hypoglycemics, sodium-glucose cotransporter 2 (SGLT2) inhibitors, was a negative trend driver in 2021 due to many products in the class having a high federal rebate, resulting in lower net cost for the class. The SGLT2 inhibitors have many indications for use, including improving glycemic control in adults with type 2 diabetes mellitus (T2DM), reducing the risk of cardiovascular death in adults with T2DM, and reducing the risk for cardiovascular death and hospitalization for patients with heart failure. Claim volume for agents in this class increased 39.8% from 2020 to 2021.
Anesthetics, topical, was the third-largest negative net spend class in 2021, which can be attributed to decreases in net spend and net cost per claim.
Stimulants and related agents was the No. 7 net spend class; however, it was a negative trend driver in 2021. This can be attributed to an 8.1% decline in the average net cost per claim, driven in part by more than 50% declines in both utilization and cost per claim of Methylphenidate ER (Concerta) (oral).
Antivirals, Oral
Net Dollar Impact $-0.17
Vyvanse capsule (oral) Amphetamine salt combo (oral) Adderall XR (oral) Guanfacine ER (oral) Concerta (oral) Focalin XR (oral) Atomoxetine (oral) Other
Class Summary
Antivirals, oral, was the No. 1 negative net trend driver, primarily due to a 46% decline in claim volume and 35% reduction in net cost per claim. Most notably, utilization and market share of both oseltamivir capsule and suspension declined in 2021.
Notable agents that are further from approval have been identifed in Figure 34. These are products with the potential for signifcant clinical and fnancial impact. Their development status is being tracked on the MRx Pipeline radar. These pipeline products, their respective class or proposed indication, as well as an estimated fnancial forecast for the year 2026, are displayed. The fnancials are projected total annual US sales, reported in millions.
Key Conditions Forecast
The largest and most impactful classes are anticipated to continue to trend upward over the next three years, as they have in previous years. Mature classes such as stimulants and related agents and glucocorticoids, inhaled, are trending down as generic utilization increases and downward pricing pressure continue to lower the total net cost for drugs in these classes. Anticipated biosimilars in the cytokine and CAM antagonist class will contribute to lower growth in the coming years.
The MRx Medicaid Trend report focused exclusively on Medicaid FFS drug spend and does not include managed care utilization. It provides a comprehensive year-over-year analysis of Medicaid FFS pharmacy claims data on a cost per claim basis.
» The report trends are based on gross cost and net cost per claim basis and compared the 2020 calendar year data to the 2021 calendar year data.
» The data set used in this evaluation contains more than 95 million claims with a gross cost of $13.6 billion and a net cost of $5.6 billion.
» Data was obtained from 25 Medicaid FFS clients across the country from which two years of complete FFS data are available. Claims data used in this report is publicly available on the CMS website: https://www.medicaid.gov/medicaid/prescription-drugs/ state-drug-utilization-data/index.html
» Similar to commercial plans, both traditional and specialty drug trends are not immune to manufacturer price actions at the gross cost level; however, the increase at the net cost level is somewhat mitigated by supplemental rebates (where applicable) and the CPI penalty component of the federal rebate.
» To achieve the highest level of accuracy for the Medicaid FFS space, this report again incorporates the CMS federal rebate data for both 2020 and 2021. Federal rebate data at the drug level is confdential and protected by federal law under the Social Security Act at 42 U.S.C. 1396r-8 (b)(3)(d). Therefore, this report does not disclose net cost pricing information on a per drug basis.
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