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- Understanding state Medicaid spending on prescription drugs
This analysis demonstrates that state Medicaid programs are estimated to be spending near or below the national average on prescription drugs. While high drug spending makes headlines and is often the focus of legislation and policymaker attention, drug spending is not the main driver of state Medicaid spending.
Methods
Publicly available sources, including state budget documents1 and state-reported data submitted to CMS for the 2023 calendar year (e.g., CMS-64)2 were reviewed and analyzed.
Researchers analyzed state Medicaid drug expenditures and drug rebate income to generate an overview of total state spending on prescription drugs and an estimate of Medicaid drug spending as a percentage of total Medicaid expenditures for the following states: CA, CO, FL, MA, MI, NY, OH, OR, PA, and WA in FY 2023.
Researchers analyzed state Medicaid drug expenditures and drug rebate income to generate an overview of total state spending on prescription drugs and an estimate of Medicaid drug spending as a percentage of total Medicaid expenditures for the following states: CA, CO, FL, MA, MI, NY, OH, OR, PA, and WA in FY 2023.
Findings
- Across the 10 states studied, the estimated percentage of state Medicaid spending that was net prescription drug spending ranged from 4.7% to 14.3%.1
- Manufacturer drug rebates back to states ranged from $83M (OR) to $1.9B (NY).1
- These findings are near or below the national drug spending rate, which is 14% of overall healthcare spending.4
Discussion
This analysis demonstrates that states are estimated to be spending near or below the national average for drug spending as a proportion of total healthcare spending, getting sizable rebates, and covering large populations through drug coverage. Discussions around healthcare spending and drug pricing should be rooted in a factual understanding of what states are spending on medications and the value that spending may bring, as well as a better understanding of what is driving healthcare costs in individual states.
Citations
All citations
1 State budget documents collected, reviewed, and analyzed by Johnson & Johnson internal Access & Policy Research team.
2 Medicaid.gov, State Drug Utilization Data, Available here.
3 Congressional Research Services (2025) U.S. Health Care Coverage and Spending, 2023. Available here.
4 IQVIA (2021) Drug Expenditure Dynamics 1995-2020. Available here; Appendix - U.S. here.
This research was funded by Johnson & Johnson. For full details on the study design, methods and limitations, see: Johnson & Johnson Innnovative Medicine. Understanding state Medicaid spending on prescription drugs. The Center for U.S. Healthcare Policy. 2025. Available from https://policyresearch.jnj.com/download/understanding-state-medicaid-spending-on-prescription-drugs-pdf
2 Medicaid.gov, State Drug Utilization Data, Available here.
3 Congressional Research Services (2025) U.S. Health Care Coverage and Spending, 2023. Available here.
4 IQVIA (2021) Drug Expenditure Dynamics 1995-2020. Available here; Appendix - U.S. here.
This research was funded by Johnson & Johnson. For full details on the study design, methods and limitations, see: Johnson & Johnson Innnovative Medicine. Understanding state Medicaid spending on prescription drugs. The Center for U.S. Healthcare Policy. 2025. Available from https://policyresearch.jnj.com/download/understanding-state-medicaid-spending-on-prescription-drugs-pdf