States and Prescription Drugs: An Overview of State Programs to Rein in Costs

States are significant purchasers of health care for Medicaid, inmates in correctional facilities, and public employees. Despite considerable efforts to maintain affordability, drug pricing continues to vex state budgets. While Medicaid is the largest single health expenditure in state budgets, spending on health care for public workers including state employees and retirees, legislators, judicial employees, and public university employees, among others is substantial. In 2013, the cost of coverage was almost $31 billion (including employee contributions) to insure 2.7 million public employee families. Spending on prescription drugs represents 19 percent of costs under employer health plans – closing in on the amount such plans spend on inpatient services. Assuming public employee plans reflect trends observed in the private sector, the spotlight on drug spending grows brighter as states wrestle with rising benefit costs for employees. Medicaid has seen an overall increase in prescription drug spending of 3 percent, although in expansion states, where the federal government is footing 100 percent of the costs until 2017, that rise is 25 percent.

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