NCPA - National Center for Policy Analysis

Medicaid Paying More for Medications than Necessary

June 23, 2011

The U.S. Medicaid program is likely paying far more than necessary for medications and not offering patients the most effective ones available, according to a new study by researchers at the University of California, San Francisco, reports Stone Hearth News.

The study, which compared the Medicaid program's Preferred Drug Lists in 40 states nationwide against the World Health Organization's 2009 Essential Medicines List, found that the medications that are automatically paid for by the state-run Medicaid programs vary widely from state to state, with few consistent protocols or rationales for their selection.

The study set out to determine whether Medicaid patients have access to all medications listed by the World Health Organization (WHO) as essential medicines, assess how closely the state lists follow the WHO recommendations and evaluate the consistency of state lists nationwide.

  • The group identified 369 medicines in the nine therapeutic classes that had the highest annual Medicaid reimbursements and also were addressed by the WHO list.
  • All but six of the 120 WHO medications in those categories also appeared on most of the states' lists, but their use was inconsistent across the lists.
  • The study found that an additional 249 medicines only appeared on state lists and were not considered as the most effective and safest medications by the WHO.
  • The 249 medications that only appeared on state lists were composed entirely of drugs that are either nongenerics, not the recommended therapy for a disease or combination therapies.
  • They also were less likely than the WHO counterparts to have generic versions available: only 56 percent of the state-list medications have generics available, versus 76 percent of the WHO list.

While each state negotiates its drug prices, the authors note that generic drugs tend to be less costly, suggesting that states are paying more than they need to for effective medicines.

Source: "Medicaid Drugs Cost More, Deliver Less: UCSF Study," Stone Hearth News, June 18, 2011.  Timothy P. Millar et al., "Applying the Essential Medicines Concept to US Preferred Drug Lists," American Journal of Public Health, June 2011.

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