Forecasting Medicaid Expenditures for Antipsychotic Medications

The ongoing transition from use of mostly branded to mostly generic second-generation antipsychotic medications could bring about a substantial reduction in Medicaid expenditures for antipsychotic medications, a change with critical implications for formulary restrictions on second-generation antipsychotics in Medicaid. This study provided a forecast of the impact of generics on Medicaid expenditures for antipsychotic medications.

Quarterly (N=816) state-level aggregate data on outpatient antipsychotic prescriptions in Medicaid between 2008 and 2011 were drawn from the Medicaid state drug utilization database. Annual numbers of prescriptions, expenditures, and cost per prescription were constructed for each antipsychotic medication. Forecasts of antipsychotic expenditures in calendar years 2016 and 2019 were developed on the basis of the estimated percentage reduction in Medicaid expenditures for risperidone, the only second-generation antipsychotic available generically throughout the study period. Two models of savings from generic risperidone use were estimated, one based on constant risperidone prices and the other based on variable risperidone prices. The sensitivity of the expenditure forecast to expected changes in Medicaid enrollment was also examined.

In the main model, annual Medicaid expenditures for antipsychotics were forecasted to decrease by $1,794 million (48.8%) by 2016 and by $2,814 million (76.5%) by 2019. Adjustment for variable prices of branded medications and changes in Medicaid enrollment only moderately affected the magnitude of these reductions.

Within five years, antipsychotic expenditures in Medicaid may decline to less than half their current levels. Such a spending reduction warrants a reassessment of the continued necessity of formulary restrictions for second-generation antipsychotics in Medicaid.