State Medicaid Pharmacy Payments and Their Relation to Estimated Costs

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).