The social drug lag: An examination of pharmaceutical approval delays in medicaid formularies

Abstract

Several states have enacted restrictive drug formularies in order to control the costs of their Medicaid pharmaceutical programs. This study investigates the restrictiveness of these formularies by analyzing the delay in approving new drug products for Medicaid reimbursement. A restrictiveness index is developed which relates the drug product months which are denied to Medicaid patients to the potential product months of availability if all products which were newly approved for general use were simultaneously made available to the Medicaid population. The study then relates the restrictiveness of state formularies to Medicaid drug program costs and to total Medicaid program costs. We find that restrictiveness of formularies is not associated with lower drug costs, but that total Medicaid costs are lower in states with more restrictive formularies. We suggest that restrictive formularies may occur in states with other Medicaid cost-containment measures, so that total Medicaid exoenditures are contained in those states, even though there is no reduction in drug expenditures.