Stephanie Stevens, MPH Director, Research and Publications
Christine Szurek Marketing Manager
CONTRIBUTORS
Meredith Delk, Ph.D., MSW
Senior Vice President, General Manager, Government Markets
Nicole Quackenbush, Pharm.D. Vice President, Government PDL Markets
Karim Prasla, Pharm.D., MS, BCPS Vice President, Clinical Outcomes, Advanced Analytics, and Research
Katie Lockhart, MS Manager, Forecasting and Pharmacoeconomics
Eileen Zimmer, Pharm.D., MBA Senior Director, Government PDL Markets
Kristen Haloski, Pharm.D., AAHIVP
Senior Director, Government PDL Markets
Kristin Haas
Senior Data and Reporting Analyst
Doug Brown, R.Ph., MBA
Senior Vice President, Value and Access Coeus Consulting Group
Magellan Rx Management is pleased to present the sixth edition of the Magellan Rx Management Medicaid Pharmacy Trend Report, the industry’s only detailed source that looks at both the gross and net drug spend trends across Medicaid.
The year 2020 was unlike any other. Dealing with a worldwide pandemic disrupted lives and the way we think about healthcare. In response to the pandemic, states considered alternative pathways to continuity of care for patients such as telehealth, virtual pharmacy and therapeutics (P&T) committee meetings, and other technology-based solutions.
Meanwhile, advances in healthcare moved forward. An unprecedented number of drug approvals and new drugs expanded the market. Specialty drugs such as Mavyret, a pangenotypic therapy for hepatitis C, and Trikafta, a combination therapy for cystic fbrosis, made their mark, representing the highest net dollar impact in their categories. These and other introductions led to a modest increase in specialty cost trend and a positive trend in traditional for the frst time in this report’s history (see fgure 1).
In another milestone, 2020 specialty net cost crossed a threshold predicted since this publication’s frst report: Specialty drugs accounted for more than half (51.4%) of the net drug spend in Medicaid fee-for-service (FFS), while still making up only 1.3% of all utilization — a trend we see across all lines of business but most signifcantly in Medicaid.
The story of the Medicaid FFS top drug classes remained almost identical to that of previous years. The top two drug classes remained HIV/AIDS and antipsychotics, which together accounted for more than 19.8% of the total net drug spend; the top fve classes accounted for almost 40% of total net spend (see fgure 2).
Adjustments for the pandemic aside, states continued to explore unique payment models, including subscription and outcomes-based contracting models to counterbalance the increasing cost of specialty drugs. These are imperative tools in the shift from volume-based cost savings toward value-based cost savings.
All of these updates made for a dynamic year in Medicaid, which we examine in this report. Thank you for your continued interest in the Medicaid Pharmacy Trend Report. We are confdent the information in this report will drive meaningful conversations and strategic opportunities to manage Medicaid pharmacy programs in the coming years.
FIGURE 1: MEDICAID 5-YEAR NET COST PER CLAIM TREND 2016-2020
FIGURE 2: TOP 5 CLASSES BY NET SPEND 2020
HIV/AIDS Antipsychotics Hemophilia Treatment Anticonvulsants Cystic Fibrosis, Oral Other
Traditional vs. Specialty Impact
Specialty net cost surpassed traditional net cost, as predicted for the past few years. Even so, claim volume remains nominal at 1.3%.
7: TRADITIONAL COST TREND
FIGURE
FIGURE
FIGURE 5: CLAIM VOLUME
MEDICAID PHARMACY ECONOMICS
The Medicaid pharmacy pricing landscape has remained largely unchanged over the six years MRx has published 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. ll states and the istrict of Columbia currently o er this beneft to Medicaid recipients. ence, manufacturers gain “payable” status everywhere through this agreement with the Centers for Medicare 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 rebate 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 ssistance Percentage (FM P), so states share supplemental rebates as they do federal rebates with the federal government. The other rebate factor in the e uation, the rebate o set amount, continues to go entirely to the federal government and constitutes a small portion, roughly 2.5%, of the federal rebate. In 2020, the average total discount was 59.2% (54.2% federal and 5% supplemental).
» Lowest net cost is calculated net of federal, supplemental, and rebate o set amount.
» o not chase supplemental rebates at the e pense of lowest net cost.
» Brand drugs can be less expensive than their generic equivalents and can save states millions of dollars.
The Economics
To understand Medicaid economics at the drug level, assume pharmacy reimbursement, wholesale ac uisition cost (W C), and average manufacturer price ( MP) are all the same. In this instance, a new brand drug enters the market with a minimum mandatory rebate of 23.1% of MP. 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 .90 ( 100 minus 23.1%, or 23.10). To be competitive, the manufacturer will o er 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 equal to $26.90, and the total discount is 50%, or $50. s time progresses, manufacturer pricing actions drive up the total discounts. Still, due to the inverse relationship between supplemental and federal rebates, supplemental discounts decline over time as the total federal discount increases (see fgure ).
s the patent e piration approaches, the manufacturer generally increases the cost of the drug. The Consumer Price Inde for rban Consumers (CPI- ) penalty accelerates the growth of the federal rebate in the quarters prior to that event.
Key Points in Medicaid Economics
FIGURE : MEDICAID P ARMACY ECONOMICS
1 Model illustrates 1,000 claims per quarter paid at generic and brand.
2 Lower of brand or generic
Ge er I
t patent e piration, the launch of a generic is widely seen as a way to lower drug costs and save patients money. While this is true in many markets, in Medicaid, the launch of a generic re uires careful thought and fnancial evaluation. When generics frst enter the market, they typically launch at a discounted price point relative to the brand’s full price but have a federal rebate at 13% of MP. The net cost of a brand drug can be signifcantly less than the generic at this time (see fgure 10). Factors a ecting the availability of this new generic can cause the net cost of
Me F re s g
MRx Predict is Magellan Rx’s advanced analytics platform that unlocks proactive insights to help improve clinical and economic outcomes. MR Predict proactively identifes patients at risk of e periencing adverse events and forecasts future drug-cost drivers for customers. Two di erent models are available: rug Cost Forecast provides macro predictions on drug spend and trends and the factors driving those future trends. t-Risk Patient Identifcation proactively identifes and stratifes individual patients based on the probability of being nonadherent to chronic medications to improve patient outcomes. Medicaid forecasting data can be found on ge 1
the generic to remain relatively high for periods lasting from six months to multiple years.
Ge er U R e
Medicaid FFS programs most often reported lower generic utilization rates than Medicaid managed care organizations (MC ) or other commercial programs because of the federal rebate’s impact on the net cost of brand drugs compared to their generic e uivalents. CMS calculation of generic e ciency re uires states
to classify brand and generic drugs by their CMS drug class indicator instead of by their formal label name. These indicators are single-source; innovator, multiple-source; or non-innovator, multiple-source. The impact to FFS is signifcant because authorized generics ( s) that have a non-innovator, multiplesource (generic) label name pay an innovator, multiple-source (brand) federal rebate and are counted as brand drugs by CMS. ver the two-year period 2019-2020, states averaged an 8 % e ective generic dispensing rate ( R) (see fgure 11) when the drug did not have a proprietary drug name and where s count as generic even though they pay a brandlike CMS rebate. In 2020, states included in this report saved 3 8. million or 5.53 per claim using a brand over generic strategy.
MRx Predict shows that the overall gross trend is expected to increase steadily until 2023, which will see a 1.5% decrease. ross and net trend both see their largest predicted increase from 2019 to 2020. Unlike gross trend, net trend will increase through 2023, when it will taper to 0. % (see fgure 12). Rebates will continue to help o set increasing drug prices, but the high cost of new specialty drugs will continue to impact the net trend.
MEDICAID FEE-FOR-SER ICE TRENDS
Fe er Re e U e
Following a several-year increasing trend, the aggregate federal rebate percentage inclusive of the rebate o set amount (R ) decreased 0.4% in 2020, from 54. % in 2019 to 54.2%. This decline, driven by new specialty drugs, was o set by a corresponding rise in supplemental rebates — good news for states. n closer inspection, the federal rebate on traditional drugs increased to 4. %, up nearly two percentage points from 2019. The federal rebate on specialty drugs decreased 2. %, from 48.4% to 45.8%. Considering that new-to-market drugs start with a federal rebate of 23.1% of MP, higher utilization of newer products likely pulled down the average specialty federal rebate.
The average federal rebate can subdivide into specialty and traditional drugs or brand and generic drugs (see fgure 1 ). s previously noted, the growth in specialty net spend was the primary driver of lower average federal rebate in 2020.
O er Drug C s Tre s
2020 saw an increased gross cost per claim and net cost per claim of 8.5%, or 10.21, and 8.9%, or 4.3 , respectively. The frst positive traditional trend in fve years and a double-digit specialty trend contributed to these signifcant increases (see fgures 14 15).
FIGURE 1 : FEDERAL REBATE PERCENTAGE BY SEGMENT
FIGURE 14: GROSS COST PER CLAIM 201 -2020
FIGURE 15: NET COST PER CLAIM 201 -2020
2020 % Change
CLASS AND DRUG TRENDS
Therapeutic Class Net Dollar Impact
Cystic fbrosis, oral, and I I S had the highest net dollar impact and highest net spend among classes, while stimulants and hemophilia had the largest decreased net dollar impact (see fgure 16).
Three of the fve classes whose net dollar impact decreased — stimulants and related agents, hemophilia, and hepatitis C — also saw decrease in net spend and claim volume. In traditional, impact to net dollar changes was lower than in previous years, contributing to the frst positive traditional trend in fve years (see fgure 17).
16: 2020 TOP 5 CLASSES IT INCREASING TOTAL NET SPEND BY DOLLAR IMPACT
Traditional Specialty
17: 2020 TOP 5 CLASSES IT DECREASING TOTAL NET SPEND BY DOLLAR IMPACT
Traditional Specialty
Drug Ne S e I
The top drugs by percent of net spend belong to the top fve classes by net spend. The specialty beneft had the top three drugs by percent of total net spend. I I S accounted for three of the top eight drugs, contributing .5% of total spend, e uating to 335. million. lthough hepatitis C is still contributing to specialty’s decrease in total net spend, Mavyret utilization contributed to the class’s 1.3% of specialty’s total net spend (see fgure 18).
n the traditional beneft, antipsychotic agents accounted for fve of the top eight drugs, contributing 5.3% of total net spend, or 2 3. million (see fgure 1 ).
Glucocorticoids (Inhaled)
FIGURE
FIGURE
FIGURE 18: 2020 TOP 10 SPECIALTY DRUGS BY PERCENT OF TOTAL NET SPEND
FIGURE 1 : 2020 TOP 10 TRADITIONAL DRUGS BY PERCENT OF TOTAL NET SPEND
Cystic Fibrosis, Oral
HIV/AIDS
Class Summary
Cystic fbrosis, oral, a specialty class, was the o. 5 net spend category in 2020, with a positive net dollar impact on total net spend. New combination therapy Trikafta made a huge splash in the category, with the highest net dollar impact of all agents. Combining the tablet and packet formulations, Kalydeco had the second-highest market share in the class but a negative net dollar impact.
HIV antiretrovirals, a specialty class, remained the No. 1 net spend class in 2020 and was also the No. 1 positive trend driver. The top six drugs in the class made up close to one-third of market share, led by Biktarvy. After three years on the market, Biktarvy is not only the No. 1 net spend product in Medicaid but has also gained a quarter of the class’s market share.
Antipsychotics, a traditional class, was the No. 2 net spend category in 2020, with a positive net dollar impact on total net spend. Quetiapine (Seroquel) had the highest market share in the class, while Vraylar, not included due to low market share, had the highest dollar net impact on the class.
Cytokine and cell adhesion molecule (CAM) antagonists, a specialty class, was the No. 7 net spend category in 2020, with a positive net dollar impact on total net spend. Humira injector remained the agent with the highest market share but lost some market share to Cosentyx injector.
Anticonvulsants, a traditional class, was the No. 4 net spend category in 2020, with a positive net dollar impact on total net spend. Although new agent Epidiolex had less than 1% market share, it contributed to the positive net spend, accounting for 1.4% of total net spend, and was the o. 5 drug by net spend across traditional and specialty categories.
Topiramate tablet (oral) Divalproex ER (oral) Other
Class Summary
Opiate-dependence treatment, a traditional class, was the No. 8 net spend category in 2020, with a positive net dollar impact on total net spend. The majority of market share belongs to Suboxone flm, which makes up 49.8% of the total net spend for the category.
FIGURE 27: MARKET SHARE AND NET DOLLAR IMPACT
Subo one flm (S ) Buprenorphine HCL (SL) Naltrexone (oral) Zubsolv (SL) Buprenorphine/naloxone tab (SL) Narcan spray (nasal) Other
Oncology, Oral: Hematology
Hepatitis C Agents
Class Summary
Oncology, oral: hematology, a specialty class, was the No. 10 net spend category in 2020, with a positive net dollar impact on total net spend. Market share in this class was closely spread, but Revlimid had the highest market share and accounted for 20% of class spend.
Hepatitis C agents, a specialty class, was the No. 9 net spend category in 2020, with a positive net dollar impact on total net spend. As seen in total net spend for Medicaid, Mavyret was the top agent by utilization in the class but had a negative dollar impact on the category.
Hemophilia, a specialty class, was the No. 3 net spend category in 2020, with a negative net dollar impact on total net spend. The majority of agents in the class had a net negative dollar impact, though Hemlibra and Alprolix had a positive dollar impact. Hemlibra had more than a quarter of the utilization in the class, increasing almost 10 percentage points from 2019.
Stimulants and related agents, a traditional class, was the No. 6 net spend category in 2020, with a negative net dollar impact on total net spend. Vyvanse capsule had a negative net dollar impact but accounted for the highest market share in the class.
FIGURE 25: MARKET SHARE AND NET DOLLAR IMPACT
Focalin XR (oral) Amphetamine salt combo (oral) Guanfacine ER (oral) Vyvanse capsule (oral) Concerta (oral) Adderall XR (oral) Other
PIPELINE AND FORECASTING
Pharmacy Pipeline
Figure 30 identifes notable agents that are further from approval. These are products with the potential for signifcant clinical and fnancial impact. Their development status is being tracked on the MR Pipeline radar. These pipeline products, their respective class or proposed indication, as well as an estimated fnancial forecast for the year 2025, are displayed. The fnancials are pro ected total annual .S. sales, reported in millions.
For more detailed information on the pipeline, please see the latest MR Pipeline Report on our website.2
Key Conditions Forecast
With a steady increase in the pipeline, most key conditions will see annual increases in trend over the ne t three years. Conditions with generic introductions or specialized management strategies, such as hepatitis C (see fgure 1), will see decreases in trend.
For more detailed information on the pipeline, please see the latest MRx Pipeline Report on our website.3
Specialty drug names appear in magenta throughout the publication.
nticonvulsants emophilia Cystic Fibrosis
Stimulants and Related gents ncology, ral: ematology epatitis C Cytokine C M ntagonists pioidependence Treatment
FIGURE 30: KEEP ON YOUR RADAR
METHODOLOGY
The Magellan Rx Medicaid Pharmacy Trend Report focuses 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 compare the 2019 calendar year data to the 2020 calendar year data.
» The data set used in this evaluation contains more than 97 million claims, with a gross cost of $12.7 billion and a net cost of $5.2 billion.
» Two years of complete FFS data was obtained from 25 Medicaid FFS clients across the country. 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.
» Like commercial plans, 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-U penalty component of the federal rebate.
» This report incorporates the CMS federal rebate data for both 2019 and 2020 to achieve the highest accuracy for the Medicaid FFS space. Federal rebate data at the drug level is confdential and protected by federal law under the Social Security ct 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.
For a downloadable version (PDF) of this report or any of our other trend reports, please visit magellanrx.com.
