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Assessment of Virginia Medicaid Pharmacy Benefits Carve-Out Impacts

Some Virginia policymakers have indicated an interest in moving to a pharmacy “carve-out” within the Medicaid managed care program, whereby the state would instead manage the pharmacy benefit for MCO enrollees, including paying directly for drugs made available in the program. Virginia’s Association of Health Plans engaged The Menges Group to estimate the fiscal impacts of Virginia switching to a carve-out model as well as the programmatic advantages and disadvantages of this potential change. We estimate that a change to a pharmacy carve-out would result in a 20.2% increase in net (post-rebate) Medicaid pharmacy expenditures across the five year timeframe SFY2020 – 2024, increasing net state fund costs by $12 million in the first year of implementation and by $157 million over five years.

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