GAO: Prescription Drugs Are Just 2% of Medicaid Spending

Last week, the Government Accountability Office (GAO) released a detailed look at Medicaid and key issues facing the program. Despite rhetoric about the cost of prescription medicines in Medicaid, the cost of prescription drugs is not a main driver of cost growth. The GAO report shows that fee-for-service drugs accounted for just 1.7 percent of Medicaid expenditures in 2014.

Even with a new generation of hepatitis C medicines reaching the market in late 2013, prescription medicines still represent a small share of Medicaid spending and are not a main driver of Medicaid spending growth.  

Further, on average about 60 percent of the initial cost of brand medicines is returned to states through Medicaid rebates, so any source citing initial costs greatly overstate costs net of rebates.

GAO’s picture of Medicaid spending helps put prescription drug costs into perspective.