Anticipated efficiencies, real costs: Medicaid managed care organizations and the pharmacy benefit

The Affordable Care Act led an additional 15 states to begin contracting with comprehensive, risk-based managed care organizations (MCOs) to administer pharmacy benefits for Medicaid beneficiaries between 2010 and 2017. Reasons for this shift included concerns about administering complex benefits for an influx of new beneficiaries, assumptions about the cost-saving potential of privately run managed care, and a desire for budget predictability. As drug prices increased during the past decade, the way that state pharmacy benefits were administered via MCOs affected the ability of states to meet the needs of their Medicaid beneficiaries. Here, we review the advantages and limitations of 2 strategies that give states more centralized control over management of the pharmacy benefit: excluding the pharmacy benefit from MCO contracts and aligning preferred drug lists across beneficiary types. We propose that centralizing utilization management tools, aligning incentives for managed care payers with the needs of patients and Medicaid programs, and the ability to implement formulary exclusions may enable states to achieve savings and better meet the needs of beneficiaries.