Costs and Pricing

Costs and Pricing

Cost of pharmaceuticals


NCSL reports describe state roles in "Prescription Drug Purchasing Agreements and Volume Purchasing," including use of preferred drug lists (PDLs), federal and state agreed manufacturer rebates, multi-state purchasing and comparative effectiveness review of medications. These are part of a series on "Health Cost Containment and Efficiencies" available online with periodic updates. [updated 10/3/2013]





States have enacted a variety of changes in their Medicaid programs to respond to the challenges arising from increased demand for and higher costs of prescription drugs. Recent state legislation related to Medicaid prescription drugs generally is designed around new or expanded applications of management tools already available to states through federal law.  A 2013 federal report documents a substantial slow-down expenditures to less than 4 percent annually..



Prescription drugs account for almost 10 percent of overall health spending in the United States, totaling $263 billion annually.  State and federal governments have focused on successfully managing these costs through a variety of approaches. These include widespread use of increased manufacturer rebates, use of preferred drug lists, prior authorization, state-initiated bulk purchasing, and large retailers’ competition to offer $4 prescriptions for many widely used drugs. States are changing the way they calculate their Medicaid prices and also addressing industry and consumer price transparency and provider education. 

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