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in recent years , the contribution of drugs to the treatment of medical conditions has increased more rapidly than most nonpharmaceutical approaches to disease .
medicaid is now the number one payer of medical care in the united states , having surpassed medicare recently .
therefore , it is especially important that medicaid drug utilization and expenditures be carefully tracked to address concerns about drug access , affordability , safety , and effectiveness .
the recent passage and implementation of the medicare prescription drug , improvement , and modernization act ( mma ) of 2003 has contributed to public attention to these issues .
the mma provides medicare beneficiaries with a prescription drug benefit , arguably the most significant change in health care for the elderly in nearly 40 years .
dually eligible individuals , persons with both medicare and medicaid eligibility , if they receive full benefits under medicaid and if they elect to participate in the program , will receive their drug benefits under medicare beginning in 2006 .
this legislation is expected to decrease medicaid expenditures for drugs , because most of the expenditures for full - medicaid benefit dually eligible individuals will be shifted to medicare .
states will continue to pay their matching portion in full for nondually eligible enrollees and will be required to make a phased down contribution to medicare for a portion of the drug costs for the dually eligible enrollees starting at 90 percent of estimated costs in 2006 and scaling down to 75 percent of estimated costs by 2015 and beyond .
there are a few recent studies in the literature investigating medicaid drug utilization , expenditures , and/or cost containment efforts .
2004 ) reported an average annual increase of 16.3 percent in medicaid spending for the dually eligible individuals between 1990 and 2000 .
they also found that disabled persons experienced a 20-percent average annual increase in drug spending during this time period .
tepper and lied ( 2004 ) reported that medicaid spending on drugs increased from $ 2.3 to $ 24.7 billion between 1985 and 2001 and that medicaid drug spending nearly doubled from 1997 to 2001 .
abramson et al . ( 2004 ) analyzed maximum allowable cost ( mac ) programs in five states and concluded that expansion of existing mac programs and creation of new ones could help states in cost containment efforts .
the current study builds on these research efforts by presenting more recent data on medicaid drug use and expenditures and by systematically examining the trends in utilization over a substantial time period ( cys 1994 - 2003 ) in which growth was particularly dramatic .
we begin by presenting utilization and expenditure data over this time period , reporting both nominal and inflation - adjusted expenditure data .
then , we examine changes from year to year in mean prescription reimbursements and how these changes compare with changes in the medical consumer price index ( mcpi ) .
we compare utilization and expenditures of the top 40 drugs versus all other drugs between cys 1994 - 2003 .
lastly , we report utilization and payments by drug groups and compare utilization and reimbursements of the top 40 drugs in terms of reimbursements for cys 1998 - 2003 .
the results presented in this article were obtained using two sources : ( 1 ) state drug utilization data files for 1994 - 2003 ( medicaid drug rebate program ) and ( 2 ) the master drug database of medi - span .
the state drug utilization data files were merged with data abstracted from the master drug database .
using state drug utilization data files from 1994 - 2003 , the percent change in mean reimbursement rates was compared directly to the percent change in the mcpi , ( u.s . department of labor , bureau of labor statistics , 2005 ) .
constant dollar amounts were found using the following formula : r = real value ( constant dollar ) n = nominal value ( current dollar ) and mcpi = medical consumer price index .
patterns in reimbursement were compared to patterns in utilization for 2003 . using the state drug utilization data files , total prescriptions , total reimbursements , and
we also investigated the top 40 drugs in terms of reimbursements from cys 1994 - 2003 , and compared their utilization , reimbursements , and mean prescription reimbursements with the remaining ( all other ) drugs . for 1998 and 2003 , we investigated changes in the top 40 drugs on a specific brand name basis .
table 1 displays the number of medicaid drug prescriptions , the total amount reimbursed , and the mean reimbursement per prescription between cys 1994 - 2003 . reimbursed amounts in this study are not net of rebates which , overall , reduce total drug reimbursements by about 20 percent . in 1994 ,
the total number of prescriptions was 333 million , the amount reimbursed was $ 8.4 billion , and the mean reimbursement per prescription was $ 25.34 . by 2003 ,
the number of prescriptions increased to 573 million , the amount reimbursed approximately quadrupled to $ 34.3 billion , and the mean price per prescription more than doubled to $ 59.85 .
the increase in the reimbursed amount for medicaid prescriptions during this 10-year period was a function of the increase in the number of medicaid enrollees , the number of prescriptions per enrollee , and the mean price per prescription .
table 2 compares the percent change in the base years ' 1982 - 1984 mcpi with the percent change in the mean prescription reimbursement between cys 1994 - 2003 and adjusts the mean prescription reimbursement based on 2003 dollars . between cys 1994 - 2003 ,
the percent change in the mean prescription reimbursement outstripped the percent change in mcpi , often by impressive margins .
however , by 2003 the difference between the percent change in the mcpi and the percent change in the mean medicaid prescription reimbursement was only about 1 percent ( 3.87 versus 4.91 ) . in 1994 , the mean reimbursement in 2003 dollars was $ 35.68 . by 2003 ,
therefore , over this time period the mean reimbursement had increased by $ 24.17 in constant 2003 dollars , an increase of 68 percent .
figure 1 presents the relationship between percent changes in the mcpi and mean prescription reimbursements between cys 1994 and 2003 .
figure 2 illustrates the trend in mean medicaid prescription reimbursements between cys 1994 and 2003 in both nominal and constant 2003 dollars .
table 3 lists the number of prescriptions , percent of total prescriptions , total reimbursements , percent of total reimbursements , and the mean reimbursement per prescription for the top 40 drugs , in terms of total reimbursements , and for all other drugs for cys 1994 - 2003 .
the mean reimbursement amount per prescription was greater for the top 40 drugs compared to other drugs during this 10-year period . in 1994 ,
the mean reimbursement amount per prescription was $ 45 for the top 40 drugs compared to $ 21 for all other drugs . by 2003 ,
the mean reimbursement amount per prescription was $ 131 for the top 40 drugs compared to $ 42 for all other drugs .
the top 40 drugs accounted for 34 percent of total drug reimbursements in 1994 and 43 percent of total drug reimbursements in 2003 . with many more drugs available in 2003 compared to 1994
, this result suggests that the top drugs had a significantly greater share of the market in 2003 than they did in 1994 .
figure 3 displays total reimbursements for the top drugs and for all other drugs for cys 1994 - 2003 .
reimbursements for the top 40 drugs as a percent of total drug reimbursements gradually and steadily increased between 1994 and 2001 , but showed a very slight decline between 2001 - 2002 , and 2002 - 2003 .
table 4 presents the total number of prescriptions and reimbursements by drug group for 2003 .
mean reimbursement is also presented . central nervous system ( cns ) drugs ( primarily used to treat psychiatric conditions ) had the highest total reimbursements of all groups at approximately $ 7.3 billion .
these drugs accounted for more than 21 percent of the total drug reimbursements in 2003 .
cardiovascular agents were first in terms of total prescriptions and second in terms of total reimbursements at approximately $ 4.1 billion or 12 percent of total reimbursements .
anti - infective agents were third in terms of reimbursement at $ 3.4 billion followed by analgesics and anesthetics at nearly $ 2.9 billion , respiratory agents at $ 2.8 billion , and endocrine and metabolic drugs at just short of $ 2.8 billion .
gastrointestinal agents followed closely at $ 2.7 billion and neuromuscular drugs were not too far behind at a little more than $ 2.4 billion .
table 5 displays the number of prescriptions , total reimbursement amounts , and mean reimbursement for the drug brands that comprised the top 40 drugs in 1998 and 2003 .
only 14 of the top 40 drugs in 2003 , in terms of total reimbursements , were also on the top 40 list in 1998 .
however , zyprexa and risperdal , drugs primarily used to treat psychoses , were the number one and number two medicaid drugs in terms of reimbursements in both 1998 and 2003 . between 1998 and 2003 ,
the number of prescriptions for zyprexa increased by 145 percent from 2.3 to 5.6 million .
the number of prescriptions for risperdal increased by 110 percent from 2.9 to 6.1 million .
this study used national medicaid data from 1994 - 2003 to investigate trends in noninstitutional drug utilization and expenditures in the medicaid program .
we found that there was a substantial increase in both drug utilization and expenditures during this timeframe . in itself , this is not too surprising given the growth of the pharmaceutical industry and the development of many new and safer drugs that are being used effectively to both prevent and treat illness .
increased utilization , however , has been the result of several other factors including increases in ( 1 ) medicaid enrollment , ( 2 ) the mean number of prescriptions per enrollee , ( 3 ) mean nominal and inflation - adjusted reimbursement per prescription , and ( 4 ) the tendency for increased use of new and more expensive drugs . in 2003 ,
the top three drug groups in terms of reimbursements were cns drugs , cardiovascular agents , and anti - infective agents .
cns drugs accounted for more than 1 in 5 drug dollars spent on medicaid beneficiaries in that year .
the top drugs in the cns group in terms of expenditures were zyprexa , risperdal , and seroquel , which were also the top three drugs overall .
all three of these drugs are used to treat psychoses . among the top 40 drugs in terms of medicaid reimbursements in 2003 , not one was a generic .
it is clear that efforts to control medicaid spending can not overlook the considerable growth in drug expenditures that has occurred over the past 10 years or more . in the entire mix of medicaid services ,
drugs are now a much more prominent factor than they were a decade ago , and there is no sign that this dominance will abate in the foreseeable future .
if anything the predominance and costs of drugs in the treatment of disease are likely to increase over the next few years .
it also seems likely that a relatively select group of drugs , many of them among the newest , will dominate the market for each year in the foreseeable future , even though many of the specific drugs dominating the market may change from year to year .
the question for policymakers will be how to ensure that beneficiaries have access to the most safe and effective drugs while simultaneously ensuring that the spending on drugs is affordable . under the 2003 mma , dually eligible beneficiaries who are eligible for both medicare and full - benefit medicaid services will be receiving their drug benefits under medicare in 2006 , and beyond .
they are both older and more likely to be disabled than non - dually eligible medicaid beneficiaries , thus accounting for much of their tendency toward higher utilization of drugs and other medical services .
it is important that their drug utilization continue to be studied as they transition from medicaid to medicare coverage for their drug coverage .
one of the limitations of our study is that we were not able to provide utilization and reimbursement data for different population groups within medicaid .
the state drug utilization data files available from the medicaid drug rebate program did not contain data on beneficiary characteristics .
we were thus limited in our ability to assess trends in use in different populations , although the drug groups and specific drugs with highest utilization certainly gave us some clues about prescription drug usage in vulnerable population groups .
for example , our data suggest that the newer psychotropic drugs have replaced older drugs in the first - line treatment of serious mental illness .
another limitation of our study is that we were unable to net out the drug rebate amounts so the expenditure figures are inflated .
overall , rebates reduce total drug expenditures by about 20 percent , but from the data available in this study we do not know these amounts for specific drugs .
one suggestion for future research would be to investigate trends in brand name versus generic drugs in terms of medicaid utilization and expenditures .
comparing these trends with corresponding trends in medicare and commercial plans would add to the utility of this research , especially if it were possible to control for differences in population characteristics .
it seems likely that the increased use of generics , as a substitute for brand name drugs , when appropriate , might reduce overall drug spending in medicaid .
budget pressures are forcing states to take a hard and often painful look at main cost drivers .
medicaid has recently overtaken education as the number one state budget item on a national basis .
since growth in drug expenditures is one of the key drivers to overall expenditure increases in the medicaid program in recent years , it is likely that states will be particularly determined to explore strategies for containing drug costs in medicaid for the foreseeable future .
this study used national medicaid data from 1994 - 2003 to investigate trends in noninstitutional drug utilization and expenditures in the medicaid program . 
 we found that there was a substantial increase in both drug utilization and expenditures during this timeframe . increased 
 utilization resulted from increases in medicaid enrollment , the mean number of prescriptions per enrollee , mean nominal and inflation - adjusted reimbursement per prescription , and the tendency for increased use of more expensive drugs . 
 the top 40 drugs accounted for nearly $ 14.4 billion , roughly 43 percent of the total drug reimbursements for calendar year ( cy ) 2003 .