Changing prescribing patterns and increasing prescription expenditures in Medicaid

Prescription drug expenditures are the most rapidly growing component of total health care expenditures and particularly affect state Medicaid programs. We determined the extent to which increasing prescription price and changing prescribing patterns contribute to rising prescription expenditures in Medicaid.

We conducted a claims-based analysis comparing annual prescription drug expenditures and prescribing patterns. Prescription drug and outpatient visit claims for all North Carolina Medicaid enrollees from 1998 through 2000 were included. We analyzed drugs individually by combining all prescriptions and expenditures for the same drug formulation, and we calculated the number of units dispensed per person-year of enrollment.

Prescription drug coverage for 1 person-year cost 503 dollars in 1998 and 759 dollars in 2000, for an annual increase of 22.8%. The average number of prescriptions filled per person-year increased from 13.0 in 1998 to 15.5 in 2000. Increased prescribing for 6 drugs accounted for more than 25% of the total increase in expenditures. The price for the 15 most expensive drugs increased an average of 4.1% annually.

Prices for existing drugs increased slightly during the study period, but the major cause of the increase in drug costs was an increase in the number of prescriptions for new and more expensive medications. Prescribing patterns in Medicaid differ somewhat from those in the private sector and partly reflect the population with low socioeconomic status and high health care needs that it serves. To help control rising prescription drug expenditures, efforts should be undertaken to improve appropriate and cost-effective prescribing.