States Overpay for Medicaid Fee-for-Service Drugs

The fees states pay pharmacies to dispense drugs for Medicaid enrollees varies widely according to a new report by the consulting firm The Lewin Group. For instance, Texas pays a dispensing fee of more than $7 for each Medicaid drug filled. Arkansas pays about the same and California pays nearly as much.  By contrast, Michigan, Massachusetts and Tennessee pay around $3 or less, while New Hampshire pays less than $2.

If state Medicaid fee-for-service (FFS) drug benefits were managed like private insurers, such as Medicare Part D and Medicare managed care plans, the combined savings would exceed $30 billion over the next decade, with more than $12 billion in New York, California and Texas alone.

Comments (8)

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  1. Bruce says:

    The government overpays? I’m supposed to be shocked at that result?

  2. Ken says:

    Bruce, remember Claude Rains in Casablanca? ” I’m shocked. I’m shocked. There’s gambling in here.”

  3. Devon Herrick says:

    Considering Medicaid is a huge payer in many states, I would assume Medicaid dispensing would be competitive. However, I can also understand how many drug stores would not want to fill these prescriptions unless the dispensing fee was high considering how slow and bureaucratic collecting payments from state Medicaid programs often can be.

  4. Brian Williams. says:

    Thriving competition and entrepreneurial innovation are smothered when the State sets across-the-board fees, as in this case.

  5. Larry C. says:

    Let’s see. The states are supposed to be in real financial trouble? You couldn’t prove it by me.

  6. Erik says:

    Once again, corporations ripping off taxpayers in the name of profits.

    When will corporate america stop being welfare queens?

  7. I was surpised to read that just under half of the savings come from generic substitution, rather than reducing dispensing fees.

    It’s mindboggling that Medicaid programs do not automatically substitute the generic version to the brand-name equivalent (unless the physician writes “DNS” on the scrip). This would save much more money than riskier methods, like therapeutic substitution of drugs in the same class, but not the same molecule.

  8. Vanessa Elizebeth says:

    This will have an impact on generic drug manufacturers as well as pharmacies. Thus, Medicaid pharmacy reimbursement policies are critical to pharmacies, wholesalers, and generic-drug manufacturers.