Do State Cost Control Policies Reduce Medicaid Prescription Drug Spending?

We present the first systematic analysis of state policies limiting prescription drug access under Medicaid during 1990–2004, documenting their impact on states’ Medicaid prescription spending growth. We see substantial variation in the number and type of policies used by states, but a clear upward trend in restrictions over time. Analysis of state level annual spending growth shows that these restrictions have in general helped contain Medicaid prescription drug costs and that some approaches, such as the use of preferred drug lists (PDLs) and tiered copayment systems, may have been more effective than others.