New AHRQ Study Shows Medicaid Spending on Outpatient Drugs More Than Doubled in Recent Years

Press Release Date: April 26, 2006

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 HHS' Agency for Healthcare Research and Quality.

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 persons 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.

"This study helps pinpoint the patterns that have been driving significant increases in Medicaid drug spending," said AHRQ Director Carolyn M. Clancy, M.D. "These data help identify classes of medications for which more evidence is needed on the comparative effectiveness of new drugs. This comparative evidence has the potential to help State and Federal policymakers identify circumstances where costs could be safely reined in without affecting the quality of medical care for Medicaid enrollees."

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.

AHRQ's Jessica S. Banthin, Ph.D., and G. Edward Miller, Ph.D., also used data from the Agency's Medical Expenditure Panel Survey and other sources to examine brand-name versus generic drug use during the period. Overall, generic drugs' share declined only slightly—from roughly 47 percent to 44 percent. But those figures mask more substantial changes for different types of drugs, according to the researchers. For instance, use of generics decreased for about half the drugs studied and increased or stayed about the same for the other half.

For more information, see "Trends in Prescription Drug Expenditures by Medicaid Enrollees," in a special supplement to the May 2006 Medical Care called "Trends in Medical Care Costs, Coverage, Use and Access: Research Findings from the Medical Expenditure Panel Survey." This special issue features nine articles focusing on such topics as employment-related health insurance and reduced prescribing of antibiotics to children.

For more information, please contact AHRQ Public Affairs: (301) 427-1539 or (301) 427-1865.

Internet Citation:

New AHRQ Study Shows Medicaid Spending on Outpatient Drugs More Than Doubled in Recent Years. Press Release, April 26, 2006. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/press/pr2006/meddrugpr.htm