The Centers for Medicare and Medicaid Services (CMS) is working to help state Medicaid programs get the best deal possible when purchasing prescription drugs. The second phase of CMS’s Medicaid retail drug price survey will poll pharmacies on a monthly basis to create a National Average Drug Acquisition Cost (NADAC) pricing file. States will have access to the file as a way to compare their own drug costs to the national average. CMS itself will gather data on how much state Medicaid programs are spending on the 50 most widely prescribed drugs and will compare state data to national retail sales data.

CMS estimates total prescription drug spending nationwide grew 3.9 percent in 2011, to $269.2 billion. Drug spending growth has slowed in recent years as more people use generic drugs, which retail for 75 percent less than similar brand-name drugs. However, CMS expects annual drug spending growth to increase significantly – to 8.8 percent – in 2014 because of demand for drug from people newly insured in Medicaid and health insurance exchange plans under the Affordable Care Act (ACA) health reform law. From 2015 to 2021, CMS projects annual drug spending growth to drop to 6.6 percent.  However, it is important to note that CMS projections for Rx spending growth are substantially higher than the experts at IMS Health.

State Medicaid programs will spend about $21.1 billion on prescription drugs in 2012 and about $22.1 billion in 2013.  Overall, Medicaid drug spending has moderated recently as a result of multiple factors, including state cost containment efforts, expansion of both federally mandated rebates and state negotiated supplemental rebates, extension of Medicaid best price to drug utilization in Medicaid health plans, and increased number of generics on the market.

However, Medicaid prescription drug spending, as noted, will increase substantially in 2014.  CMS actuaries project Medicaid will spend $32 billion in 2014 – an increase of 45.2 percent over 2013 – and about $49.3 billion in 2020.

CMS’s national survey of Medicaid drug acquisition costs at the pharmacy level is divided into two parts:

  • Part I uses retail community pharmacy consumer prices to determine the monthly national retail community pharmacy prices for covered outpatient medications.
  • Part II will survey retail community pharmacy ingredient cost to determine acquisition costs for covered outpatient drugs purchased by both chain and independent community pharmacies. Part II began June 1, 2012, with 2,000 to 2,500 pharmacies surveyed at random each month. Specialty pharmacies will not be surveyed.

Myers and Stauffer, LC is conducting the survey, which CMS developed in conjunction with stakeholder representatives from wholesalers, pharmacy associations, and state Medicaid programs.


Kip Piper is a Medicaid, Medicare, and health reform consultant, speaker, and author.  For more, visit  Follow on Twitter at @KipPiper and connect with Kip on LinkedIn.