This measure is important because it monitors estimated net spend on pharmaceuticals and identifies any changes in the spending trend. This report tracks net spend to help optimize rebate opportunities and utilization management programs. 

This performance measure estimates net drug spending by subtracting all rebates invoiced from gross payments to pharmacies. Net cost is driven by both pharmacy payments and rebates. Achieving the lowest possible net cost is driven partly by managing pharmacy reimbursement through optimal management of pricing methodologies such as the State Maximum Allowable Cost (MAC) program and Specialty Drug MAC. In addition, rebate optimization is driven by tightly managing the Preferred Drug List (PDL). Factors guiding our PDL decisions include both clinical appropriateness and consideration of drug acquisition cost, federal and supplemental rebates. Non-preferred products are managed through strategies such as prior authorization, quantity limits, and step therapy. 

There are regular fluctuations based on drug mix and seasonal variations. There is a continuous increase in total drug spend with over 8 million from SFY22 Q2 through SFY23 Q2. This may be attributed to several factors including:

• Increased specialty drug utilization:  specialty drugs tend to be higher cost claims due to enrollment increases, as well as fluctuations in rebates invoiced.
• Covid related considerations:  these include coverage for over the counter covid test kits which contributed approximately $1M to the spend since coverage began at the end of CY2021 Q2 (December 2021).  
• Continuous glucose monitors and supply accessibility:  coverage for continuous glucose monitors and supplies were made available only through retail pharmacy channels and processed only through the pharmacy benefit effective October 1, 2022. This moved spending from the medical benefit to the pharmacy benefit.
• Federal Covid pandemic rules affected Medicaid eligibility. The redetermination process is underway and the number of members on Medicaid has been decreasing as a result.  This may affect total drug spending due to less lives covered.

As the result of the Change Healthcare/Optum cyber security event, there is a decrease in rebate amounts invoiced and an increase in net drug spend for Q3 2024.   This is due to the claims processing outage from 02/21/2024 through 03/18/2024. At this point pharmacies claims for this time period have been received, but have a paid date in the next quarter, we should see the rebates ‘catch up’ in the next cycle. 

Narrative last updated:  06/28/24

• Change Healthcare
• Pharmaceutical Manufacturers

High cost drugs including cell and gene therapies are beginning to drive drug spending as new agents come to market and require coverage by Medicaid. DVHA has developed an internal mechanism to track, and forecast spend for high cost therapies.  DVHA has also put in procedures to maximize rebates in the high-cost drug space, by allowing carve out payment for high cost drugs administered in the hospital.

Updated: 02/16/24