Medicaid Pharmacy Trend Report™
Contributors
Billy Thomas Senior Vice President, State Government Solutions
Nina Bandali, PharmD Senior Director, Value-Based Pricing
Amber Small, PharmD, RPh Senior Director, Value-Based Pricing
Katie Lockhart, MS Director, Analytics
Kristin Haas Lead Health Informatics Analyst
Doug Brown, RPh, MBA Senior Vice President, Value and Access Coeus Consulting Group
Prime Therapeutics is pleased to present the ninth edition of the Medicaid Pharmacy Trend Report™ (MTR). This annual publication offers insights into the gross and net drug spend trends across Medicaid programs.
We saw overall drug trend hold steady with single-digit growth from 2022 to 2023. For the fourth year in a row, specialty drugs accounted for more than half of total net drug spend but just 1.4% of pharmacy utilization. Although we continued to see many of the same drug spend classes from previous years, Rett syndrome and sickle cell anemia were new to the top 50 classes in Medicaid last year.
In this year’s report, we track the top classes and individual drugs driving trend as well as those with the highest net spend (Pg. 4). We also rank the top 50 classes by percentage of net spend, comparing 2022 to 2023, to offer a more holistic view of the drug classes both impacting and driving Medicaid drug spend (Pg. 8). Finally, we take a deeper look into the top 10 classes driving trend
and highlight why they made such an impact on the Medicaid program — especially the cytokines and cell adhesion molecule (CAM) antagonists class, which broke into the top five net drug spend classes for the first time this year (Pg. 10).
The Medicaid Pharmacy Economics section, included in every issue of the MTR, provides the fundamental background for new readers and those who need a refresher on the calculation 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 Trend Report. We are confident the information inside will drive important conversations and strategic opportunities for managing Medicaid pharmacy programs in the coming years.
For the fourth year in a row, specialty drug trend accounted for more than half of total net drug spend but just 1.4% of pharmacy utilization.
in rebate offset (that part of the federal rebate not shared with the states)
Medicaid Fee-for-Service trends and insights
Gross cost per claim 2022–2023 Figure 2
Overall drug cost trends
In 2023, gross cost per claim rose 3.3% (+$5.16), while net cost per claim rose 6.9% (+$4.51). This year-over-year increase was substantially lower than the previous year's trend of 5.4% ($7.60) and 9.7% ($5.50) for gross and net spend, respectively.
Overall cost trends 2022–2023 Figure 1
Net cost per claim 2022–2023 Figure 3
Top 5 classes by net spend Figure 4
In 2023, the top drug classes in Medicaid programs across the country feature four of the five drug classes from previous years. The top two drug classes, HIV/AIDS and antipsychotics, switched positions this year, but still accounted for more than 17.6% of the total net drug spend. As in 2022, the top five classes accounted for almost 40% of total net spend.
Antipsychotics
HIV/AIDS
Cytokine and CAM antagonists
Anticonvulsants
Hemophilia treatments
Cystic fibrosis
All other
*See Page 8 for top 50 drug classes by net spend.
Traditional vs. specialty impact
In our year-over-year analysis, we continued to see an ever-higher percentage of total cost per claim associated with specialty drugs. In 2023, 57.4% of states’ net spend was used to reimburse providers for specialty drugs. As in previous years, specialty utilization represented 1.4% of total utilization.
Claim volume Figure 5
Total net cost Figure 6
Federal rebate update
In 2023, federal rebates declined 2.0 percentage points in the aggregate, inclusive of the rebate offset amount (ROA), from 50.9% in 2022 to 48.9% in 2023. This decline continued a trend we identified five years ago, at which time rates began dropping after federal rebate increases peaked at 55.6% in 2018. The decline, driven by new specialty drugs, was offset again this year by a corresponding 0.5-percentage-point rise in supplemental rebates. Upon closer inspection, the federal rebate on traditional drugs decreased by 2.5 percentage points to 62.7% this year, compared to last year’s 0.8 percentage point decrease. At the same time, the federal rebate on specialty drugs continued to decline, falling 0.6-percentagepoint from 39.6% to 39%.
Bearing in mind that new-to-market drugs start with a federal rebate of 23.1% of average manufacturer price (AMP), higher utilization of newer products likely weighed down the average specialty component of the federal rebate. Given the continued specialty spend growth (up 1.2 percentage points in 2023 and now accounting for 57.4% of total pharmacy spend), we expect this trend to continue.
Federal rebate percentage by segment Figure 7
The average federal rebate can be subdivided into specialty and traditional drugs or brand and generic drugs.
While the overall federal rebate as a percentage of total drug spend continues to trend downward, a closer examination of federal rebate collections across Medicaid programs included in this report shows: a 2.3-percentagepoint increase in federal rebates from 31.9% to 34.2% associated with specialty drugs; and a 2.3-percentage-point decrease in federal rebates from 68.1% to 65.8% across traditional drugs. This isn’t surprising based on year-over-year increases in specialty drug spend.
Percentage
of total federal Figure 8
Supplemental rebates have an inverse relationship to federal rebates when contracted under a guaranteed net unit price model. Supplemental rebates are collected on top of the mandatory federal rebate. Last year, supplemental rebates for traditional drugs rose 2.5 percentage points (35.1% to 37.6%), meaning supplemental rebates for specialty drugs dropped 2.5 percentage points (64.9% to 62.4%).
Percentage of total supplemental Figure 9
Medicaid forecasting
The Prime Therapeutics Drug Cost Planner provides predictions on drug spend and trend and examines the factors driving those future trends. Our Drug Cost Planner tool predicts overall gross cost per claim will rise fairly steadily over the next several years, trending between 4.4% and 5% through 2026. Overall net cost per claim will also continue to rise, trending between 5.6% and 7.3% through 2026.
Pharmacy pipeline
In this unique watch list, we’ve identified notable agents still awaiting approval. These products have the potential to make a significant clinical and financial impact and their development status is being tracked on the Prime Therapeutics Quarterly Drug Pipeline radar. We’ve displayed these pipeline products and their respective class or proposed indication, as well as an estimated financial forecast for the year 2028. The financials are projected total annual U.S. sales, reported in millions.
Medicaid forecasting Figure 10
Gross cost per claim Net cost per claim
Keep on your radar Figure 11
vusolimogene oderparepvec Oncology/Gene therapy
$82
$230 zenocutuzumab Oncology
Cardiovascular
$134 a camten
$1,152 botaretigene sparoparvovec Ophthalmology/Gene therapy
$121
etripamil (Cardamyst)
Cardiovascular
vimseltinib Oncology
$30
sebetralstat Immunology
$331
RGX-121
Metabolic/ Gene therapy
$71
$263 revumenib Oncology
$370
remestemcel-L (Ryoncil)
Immunology/Cellular
prademagene
$408
marstacimab Hematology
$197
mirdametinib Oncology
$332 inavolisib Oncology
nipocalimab Immunology
$537
patritumab deruxtecan Oncology
zamikeracel (EB-101)
Dermatology/ Gene therapy
$216
$438
Class and drug trends
Therapeutics class net dollar impact
Like last year, cytokine and CAM antagonists had the highest net dollar impact on 2023 trend, contributing $1.06 to the $4.51 (6.9%) increase in average net cost per claim. Hypoglycemics and incretin mimetics/enhancers added $0.83 to the trend, making this drug category a key new trend driver for 2023. The immunomodulator, atopic dermatitis class rose slightly, with a $0.65 net impact compared to $0.45 in 2022. Antipsychotics and Rett syndrome drugs rounded out the top five Medicaid classes, increasing net spend at $0.32 and $0.30, respectively.
Top 5 Medicaid classes increasing total net spend by dollar impact Figure 12
Drug net dollar impact
Looking at individual net drug spend as a percentage of total net spend, the top 10 specialty drugs accounted for 20.5% of the total net spend for 2023. The top 10 traditional drugs accounted for 9.8% of total net drug spend for 2023. Together, these 20 drugs accounted for nearly one-third of the net pharmacy drug spend. Top 5 Medicaid classes decreasing total net spend by
2023 top 10 specialty drugs by percentage of net spend Figure 14
Invega Sustenna (IM)
Invega Trinza (IM)
Biktarvy (oral)
Ingrezza (oral)
Dupixent syringe (SQ)
Evrysdi (oral)
Stelara
Hemlibra
Trikafta tablet (oral)
Vraylar (oral)
2023 top 10 traditional and specialty drugs driving trend
Top 10 specialty drugs increasing drug trend Figure 19
10 specialty drugs decreasing trend Figure 20
Top 10 therapeutic classes driving net trend
Cytokines and CAM antagonists
The cytokine and CAM class continued to be the top driver of Medicaid net spend (see Fig. 12). This was in addition to an $0.81 increase in 2022 and a $0.93 increase in 2021. This sustained year-over-year growth has propelled this therapeutic class to the third-highest net spend category in 2023.
The top three agents by utilization — Humira pen (high concentration), Enbrel pen and Cosentyx pen — changed little from last year. Stelara pen once again had the greatest net dollar impact on trend, increasing $0.33 with a 4.92% market share, followed by Skyrizi pen at $0.25 and 1.92% market share and Cosentyx pen at $0.14 and 5.91% market share. The transition to biosimilars was minimal over the measurement period, but is expected to accelerate through 2024 and 2025 as concerns about interchangeability subside and prescribers become more comfortable with alternative choices.
The future cost trend in this class will hinge on the conversion from Humira to its biosimilar (lower net cost impact) versus conversion from Humira to newer branded alternatives such as the ones mentioned above.
Other top classes driving trend
The other top nine therapeutic classes that drove net trend in 2023 were, in descending order: hypoglycemics, incretin memetics/enhancers; immunomodulators, atopic dermatitis; hemophilia treatments; antipsychotics; anticonvulsants; weight management agents; opiate dependance treatments; HIV/AIDS; and stimulants and related agents.
Cytokine and CAM
antagonists
Market share and net dollar impact Figure 21
Humira pen kit (INJ) (CF) Enbrel pen (INJ) Cosentyx pen (SQ) Otezla (oral) Stelara syringe (INJ) Taltz autoinjector (SQ) Humira pen kit (INJ) Other drugs
Hypoglycemics, incretin mimetics/enhancers Figure 22
Immunomodulators, atopic dermatitis Figure 23
Antipsychotics Figure 24
Figure 25
Cell and gene therapy
The acceleration of million-dollar drug treatments
There is a growing number of rare diseases that can now be effectively addressed with one-time cell and gene therapies. As of publication, there are 38 approved cell and gene therapy products.1 The FDA anticipates an additional 10 to 20 products per year will be approved beginning in 2025, according to the current pipeline and clinical success rates.2 While these therapies are lifechanging for the patients who need them, the oftenmultimillion-dollar price tags risk throwing the Medicaid state ecosystem out of balance.
One study published in JAMA Pediatrics found that if a $1.85 million sickle cell gene therapy was administered to only 7% of eligible patients annually, the average oneyear budget impact per state Medicaid program would be nearly $30 million.3 This single example illustrates the potential magnitude of the problem: Even small increases in Medicaid spending can significantly impact a state’s ability to balance its budget and fund appropriate health care for this sensitive population.
States are presented with a difficult dilemma: How can they provide necessary access to high-cost therapies while managing their pharmacy budgets?
Managing costs with value-based contracting
The scaling of these technologies allows treatment of thousands of rare diseases across more of the population. And because cell and gene therapies are one-time treatments, state Medicaid programs absorb the entire cost all at once rather than paying over time. The potential for financial exposure means existing pharmaceutical purchasing models must be reinvented to address cost while preserving access to care.
Fortunately, in the Medicaid Fee-for-Service (FFS) market, value-based contracting is now driven by the Centers for Medicare & Medicaid Services (CMS) rule changes enacted in 2022. States can now consider the value or outcome of a drug relative to its price and the overall impact to their Medicaid program’s total cost of care. Historically, states have encountered a range of barriers to adopting value-based contracts (VBCs). The most frequently cited challenge has been the administrative resources necessary to develop and negotiate VBCs, followed by the data collection and measurement requirements, the time required for implementation, and the time required to measure value.4 These challenges have previously limited the feasibility of VBCs, especially for smaller states with lower volume and utilization.
To address these challenges, Prime Therapeutics launched Value Plus, the first multistate VBC solution, which is designed to help state Medicaid programs secure access to cell and gene therapies for patients while ensuring the cost of these therapies is linked to the value they provide. If health outcomes are not realized, the manufacturer will refund a portion of the drug cost back to the state, which helps minimize their financial exposure. This multistate approach not only allows us to assist these states with negotiating and executing VBCs, but it also creates scalability and efficiency in addressing the durability of high-cost drugs.
Real-world clinical and financial outcomes are driving value alignment’s rapid growth.5 This type of contract is unique and offers additional value to state Medicaid programs beyond traditional supplemental rebate contracts. By paying for only what works through valuebased contracts, states can lower overall costs while helping members live healthier lives.
To learn more, visit the Prime Therapeutics VBC website, or email ValuePlus@PrimeTherapeutics.com to connect with a Prime representative.
1. Approved Cellular and Gene Therapy Products. (2024, August 2). U.S. Food & Drug Administration. https://www.FDA.gov/Vaccines-Blood-Biologics/Cellular-Gene-Therapy-Products/Approved-Cellular-and-Gene-Therapy-Products
2. Statement from FDA commissioner Scott Gottlieb, M.D. and Peter Marks, M.D., Ph.D., director of the center for biologics evaluation and research on new policies to advance development of safe and effective cell and gene therapies. (2019, January 15). U.S. Food and Drug Administration. https://www.FDA.gov/News-Events/Press-Announcements/Statement-FDA-Commissioner-Scott-Gottlieb-MD-and-Peter-Marks-MD-PHD-Director-Center-Biologics
3. DeMartino, P., Haag, M. B., Hersh, A. R., Caughey, A. B. & Roth, J. A. (2021). A budget impact analysis of gene therapy for sickle cell disease JAMA Pediatrics, 175(6), 617. https://DOI.org/10.1001/JamaPediatrics.2020.7140
4. Gifford, K., Winter, A. & Wiant, L. (April 2020). How State Medicaid Programs are managing prescription drug costs: Results from a state Medicaid pharmacy survey for state fiscal years 2019 and 2020. The Henry J. Kaiser Family Foundation. https://Files. KFF.org/Attachment/How-State-Medicaid-Programs-are-Managing-Prescription-Drug-Costs.pdf
5. Values & outcomes-based contracting. (2017, June 27). Pharmaceutical Care Management Association (PCMA). PCMAnet.org/Value-Outcomes-Based-Contracting
Medicaid pharmacy economics: A primer
This Medicaid economics primer, abbreviated from previous editions, is included to help readers interpret the net cost data presented in this report. For a more detailed version, read the 2021 Medicaid Pharmacy Trend Report, Pages 4-5.
Therapeutics class net dollar impact
The pharmacy economics of Medicaid are different from commercial and Medicare drug pricing and rebate management strategies. Medicaid is a state-run program with federal oversight that demands full government transparency. All Medicaid Fee-for-Service federal and supplemental rebates are paid directly to the state and then shared with the federal government in line with their Federal Medical Assistance Percentage.
Medicaid pharmacy economics
To better understand Medicaid pharmacy economics, depicted in Figure 31, let's consider a scenario in which pharmacy reimbursement, wholesale acquisition cost (WAC) and AMP are identical. A new brand drug enters the market with a minimum mandatory rebate of 23.1% 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).
For Medicaid, pharmaceutical cost evaluation is focused on the net cost of the drug after all discounts.
For Medicaid, pharmaceutical cost evaluation is focused on the net cost of the drug after all discounts (federal, supplemental and rebate offset amount), not on the total supplemental rebates offered by manufacturers or collected by states. In 2023, the states’ average federal rebate (net of the rebate offset amount) was 48.9% of gross pharmacy reimbursement.
New brand drugs have a minimum rebate of 23.1% average manufacturer price (AMP). Established brands can approach and even exceed 100% of AMP after years of discounting and Consumer Price Index for All Urban Consumers (CPI-U) penalties. Supplemental rebates are best-price exempt and averaged 7.7% of state gross spend in 2023, depending on utilization management, unit cost management and drug mix. In 2023, the average Medicaid discount (net of federal rebate, supplemental rebate and ROA) was 56.6%.
To be competitive, the manufacturer of the new brand will offer 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. Moving through time, manufacturer pricing actions drive the total discounts up, but due to the inverse relationship between supplemental and federal rebates, supplemental discounts decline over time as the total discount increases.
As the patent expiration approaches, the manufacturer 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.
Generic impact
While commercial plans generally welcome the launch of a generic for lower reimbursement and overall drug costs, in Medicaid, this welcome is delayed until after the six-month exclusivity period and the entry of multiple generics into the market. The CPI penalty for generic drugs is tied to the AMP price in the fifth full quarter after initial competition drives prices down.
Initially, generics enter the market at a discounted price compared to the brand's full WAC and have a federal rebate of 13% of AMP. The net cost of a brand drug may be notably lower than that of the generic during this period. When the net cost of the generic becomes lower than the brand, the state will prefer the generic, indicating a shift in preference. This underscores the
importance of considering net costs, as brands with rebates may be more cost-effective than generic drugs in certain scenarios.
Medicaid pharmacy economics Figure 31
Methodology
The Prime Therapeutics Medicaid Pharmacy Trend Report focuses exclusively on Medicaid FFS drug spend for Prime Therapeutics customers (highlighted in purple below) 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 bases and compared the 2022 calendar year data to the 2023 calendar year data.
•The data set used in this evaluation contains more than 80 million claims with a gross cost of $13.2 billion and a net cost of $6.8 billion.
•Data was obtained from 23 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.
•Like commercial plans, traditional and specialty drug trend 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 incorporates the CMS federal rebate data for 2022 and 2023. Federal rebate data at the drug level is confidential 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.
• All forecasts are based on the methodology Prime Therapeutics uses to project trend impact for years 2024, 2025 and 2026. All forecasts are based on available market and product information as of Aug. 1, 2024. Forecasts are subject to change if marketplace events evolve. Forecasting results are based on aggregate data to provide directional results for informational purposes only and may not reflect actual results for individual state Medicaid programs.
