Abandoning list prices in medicaid drug reimbursement did not affect spending

Research output: Contribution to journalArticlepeer-review


State fee-for-service Medicaid programs have traditionally based payments to pharmacies for drugs on a percentage of the drugs’ list price. Because list prices have increased more quickly than the prices actually paid by pharmacies, estimating appropriate reimbursements has become challenging. In recent years most states have switched to models where payments were based instead on results from a survey of pharmacy invoices. We examined how this changed fee-for-service Medicaid drug spending. We found that the policy change had minimal, if any, effects on overall Medicaid drug spending. This was at least partially explained by concomitant sharp increases in dispensing fees paid to pharmacies, designed to help cover operating expenses and profit margins. We discuss ways to improve invoice-based pricing approaches and lower costs if desired.

Original languageEnglish (US)
Pages (from-to)1202-1209
Number of pages8
JournalHealth Affairs
Issue number7
StatePublished - Jul 2020

ASJC Scopus subject areas

  • Medicine(all)


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