Medicaid spending on outpatient prescription drugs has climbed sharply in recent years even as utilization remained relatively flat and enrollment declined. A March 12 report from KFF outlines the key drivers of the increase and the early impact of new federal efforts to curb drug costs.
Here are five notes from the report:
1. Spending increased 46% over five years
Net Medicaid spending on outpatient prescription drugs rose from $31 billion in fiscal year 2019 to $46 billion in fiscal year 2024, according to a March 12 KFF report.
2. Prescription volume remained flat
Medicaid filled 751 million outpatient prescriptions in fiscal year 2024, up 2% from 734 million in fiscal year 2019. However, prescriptions per enrollee fell 12% during the same period.
3. Rebates offset more than half of costs
Drug rebates reduced gross Medicaid drug spending by an average of 53% from fiscal year 2019 to fiscal year 2024, reaching 56% in fiscal year 2024. State supplemental rebates now make up a growing share of total rebates.
4. High-cost therapies are key drivers
Spending growth was fueled by GLP-1s and specialty treatments such as cell and gene therapies.
5. New federal pricing models launched
Two CMS pricing models launched in 2026, which aim to negotiate additional rebates and expand access to obesity and specialty drugs. Both models are voluntary for states and manufacturers.
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