Most state Medicaid programs have predominantly transitioned the prescription drug benefit to the managed care setting, through which Medicaid managed care organizations (MCOs) and their contracted PBMs collaborate using their prescription drug management and broader care coordination and integration tools. By FFY 2018, almost 72% of Medicaid prescription drugs were paid by MCOs. This figure has grown substantially in recent years, driven by both the financial and programmatic advantages of the MCO model.

Read the Study: Value of Managed Care for Medicaid Rx

This paper finds that the most cost-effective strategy in Medicaid prioritizes “front end” drug mix management by maximizing both the use of generics and the use of lower cost brand and generic medications when multiple are available, which leads to the lowest average net cost per prescription. While many states opt to keep some or all Medicaid prescriptions in the FFS setting, we find there are key financial and programmatic advantages of the tools MCOs and their PBMs utilize to serve the Medicaid population under a managed care model.