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Patent expiration of brand-name pharmaceuticals creates opportunities for large savings for state Medicaid programs because generic versions of medications frequently represent a lower-cost alternative. State Medicaid programs that quickly recognize the availability of generics and adjust their drug payments in response to falling market prices can obtain the greatest benefit. We examined one such case: the movement to generic fluoxetine following patent expiration for Prozac, a widely prescribed antidepressant and an expensive drug for Medicaid. We found large differences in states' responses to generic availability. States took between two and ten calendar quarters to reach 90 percent use of generic rather than brand-name fluoxetine and four to eight quarters to achieve a 50 percent decrease in reimbursement per pill. We estimated that states failed to realize $220 million in uncaptured savings during 2001-05. By coordinating their efforts, perhaps with federal help, states could gain access in a more timely way to market prices for generic drugs and, hence, take greater advantage of the savings that those drugs offer.

Background: Under the 1995 Wisconsin Act 27, the biennial budget, Wisconsin Medicaid was required to develop an incentive-based pharmacy payment system for pharmaceutical care (PC) services. Started on July 1, 1996, the Wisconsin Medicaid Pharmaceutical Care Program (WMPCP) is the longest currently ongoing Medicaid program to compensate pharmacists for nondispensing services. The program reimburses pharmacies for providing PC services that increase patient compliance or prevent potential adverse drug problems by paying an enhanced PC dispensing fee. Pharmacists can bill for PC services provided to Wisconsin Medicaid fee-for-service and SeniorCare (i.e., state prescription drug assistance program for low-income seniors) beneficiaries., Objectives: To examine trends in (a) the number of pharmacies participating in the WMPCP and the intensity of participation among participating pharmacies; and (b) frequencies of reason, action, result, and level-of-service (time) codes associated with PC service claims from July 1, 1996, through June 30, 2007, which represents Wisconsin state fiscal years (SFYs) 1997 through 2007., Methods: A retrospective, longitudinal, and descriptive research design was used to analyze all paid claims for PC services provided to Wisconsin Medicaid fee-for-service and SeniorCare recipients during SFYs 1997 through 2007. The total number of paid PC claims and the average number of claims paid per pharmacy were examined to determine trends in pharmacy participation. Mean annual reimbursement amounts for PC per claim and per pharmacy were calculated. Reason, action, result, and level-of-service (time) codes that appeared in the claims were grouped into categories and analyzed to characterize the total number of claims paid overall and per SFY., Results: During the study period, one-half (n = 601) of the approximately 1,200 licensed pharmacies in the state of Wisconsin were paid for a claim through the WMPCP. However, intensity of participation in the WMPCP was low, with 57% of all participating pharmacies being paid for 10 or fewer PC claims and 19% paid for only 1 PC claim over the 11-year study period. The growth in claims per year coupled with smaller growth in the number of participating pharmacies resulted in a trend of growth in the mean number of claims per participating pharmacy in the program. The proportion of total WMPCP claims accounted for by the top 10 pharmacies with the highest volume of PC claims varied from 46.6% to 80.2% per year. Patient behaviors (e.g., early or late refills) and drug use issues/problems (e.g., patient complaints or symptoms) were the most common reasons for pharmacists to provide PC services (62% of all PC claims), although drug choice reasons (e.g., product selection opportunity) were more common after 2004. The majority (55.1%) of PC services took 15 minutes or less of pharmacists' time. The total dollar amount paid to pharmacies for PC services was $876,822 between SFYs 1997 and 2007, with an overall mean of $1,459 paid per participating pharmacy., Conclusions: Trends in pharmacy participation and claims volume showed growth, albeit limited, in PC program participation with a majority of paid claims dealing with patient behaviors and drug use issues or problems that consumed a small amount of pharmacists' time (15 minutes or less). The intensity of participation (claims per pharmacy) increased over time, suggesting that some pharmacies may have developed effective systems for participating and successfully submitting claims to WMPCP for enhanced dispensing fees. Further evaluation of the impact and implications of this program for patients, pharmacists, and the state is needed to gauge overall program success and provide evidence or guidance for continued or expanded PC initiatives.

Although prescription drugs do not appear to be a primary source of recent surges in Medicaid spending, their share of Medicaid expenditures has risen despite efforts to control costs. As part of a general concern with prescription drug policy, Congress mandated a study of the adequacy of Medicaid payments to pharmacies. In this study, several data sources were used to develop 1991 estimates of average pharmacy ingredient and dispensing costs. A simulation was used to estimate the amounts States pay. Nationally, simulated payments averaged 96 percent of estimated costs overall but were lower for dispensing costs (79 percent) and higher for ingredient costs (102 percent).

Potential impacts from two methods of changing prescription drug ingredient reimbursement in the Wisconsin Medicaid program were estimated. Current reimbursement amounts were compared with those resulting from either direct prices for eight manufacturers' products and average wholesale price less 10.5 percent for other products or wholesaler cost plus 5.01 percent for all products. The resulting overall average ingredient cost reimbursement reductions were 6.64 percent ($0.56 per prescription) and 6.94 percent ($0.59 per prescription) for the two methods, respectively. The results should be viewed from the perspective of both program savings and reduced pharmacists' revenues.

The effects of removing propoxyphene napsylate products from the Wisconsin Medicaid drug program formulary were examined. Internal analgesic expenditures and usage data for 3-month periods before and after the removal were compared (April through June 1984 versus the same period in 1985). After adjusting for price and reimbursement changes between the two study periods, overall expenditures were slightly higher after removal of these products. Expenditures per recipient, prescription, and unit all increased, as did the number of prescriptions per recipient. Expenditures, prescriptions, and recipients increased more for propoxyphene hydrochloride products as substitutes for propoxyphene napsylate products than for products in any other category. Increases also occurred for nonsteroidal anti-inflammatory products, suggesting they may have been chosen as replacement therapy. The proportion of napsylate prescriptions converted to hydrochloride prescriptions was larger for institutional patients than for noninstitutional patients. Although program expenditures did not decrease, as intended by the formulary change, other qualitative outcomes also should be considered, such as any therapeutic advantages the replacement products may have had for the patients.

Accurate payment for the acquisition costs of drug products dispensed is an important consideration in a third-party prescription drug program. Two alternative methods of estimating these costs among pharmacies were derived and compared. First, pharmacists were surveyed to determine the purchase discounts offered to them by wholesalers. A 10.00% modal and 11.35% mean discount resulted for 73 responding pharmacists. Second, cost-plus percents derived from gross profit margins of wholesalers were calculated and applied to wholesaler product costs to estimate pharmacy level acquisition costs. Cost-plus percents derived from National Median and Southwestern Region wholesaler figures were 9.27% and 10.10%, respectively. A comparison showed the two methods of estimating acquisition costs would result in similar acquisition cost estimates. Adopting a cost-plus estimating approach is recommended because it avoids potential pricing manipulations by wholesalers and manufacturers that would negate improvements in drug product reimbursement accuracy.

The effects of a Medicaid formulary restriction, adding propoxyphene napsylate to a Negative Drug List, were examined. The market shares of products in subgroups of the internal analgesic therapeutic category were compared for periods before and after the restriction. Data from Wisconsin Medicaid Management Information System claims records were analyzed to determine changes in the percent of recipients, prescriptions, and expenditures. For both noninstitutional patients, the market shares held by propoxyphene napsylate primarily were shifted to propoxyphene hydrochloride products. Secondarily, market shifts to nonsteroidal anti-inflammatory drugs (NSAIDs) occurred, and this effect was more pronounced for noninstitutional patients. The formulary restriction most affected the firm that solely marketed propoxyphene napsylate products prior to the change, since that entire market share was redistributed to other products.

A profile of Wisconsin pharmacies that provide services to Medicaid recipients in long-term-care facilities (LTCFs) was developed, and the relationships among pharmacy characteristics and drug use and reimbursement for pharmaceutical services in these pharmacies were studied. Computer-generated reports of Medicaid claims of all pharmacies that had received $1000 or more for services provided to LTCFs from July through September 1984 were included in the study; these claims were submitted by 255 pharmacies on behalf of 32,410 recipients. The reports contained the following individual pharmacy data: geographic location, total dollar payments, total number of Medicaid recipients served, percentage of recipients residing in LTCFs, total number of payments from Medicaid for prescriptions, amount paid to the pharmacy for LTCF recipients as a percentage of total payments, percentage of prescriptions paid at the unit dose rate, and average number of prescriptions and cost per LTCF recipient. An average of $137.30 per recipient was reimbursed, representing an average of 12.3 prescriptions per recipient. The average number of prescriptions per recipient did not vary among pharmacies on the basis of unit dose or traditional distribution system, vendor-consultant status of the pharmacist, location of the pharmacy, or the proportion of LTCF claims to total Medicaid prescription claims. The average amount paid per recipient was related to the average number of prescriptions per recipient, the use of a unit dose system, and the proportion of nursing home claims to total claims submitted. A Medicaid database can be useful for characterizing pharmaceutical services and drug use in LTCFs.