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State Medicaid Formularies: Do They Increase Costs?

In an effort to control the rising cost of Medicaid, states frequently create a “Preferred Drug List” or Formulary. These formularies usually prevent patients from obtaining newer (and more expensive) drugs. But the evidence suggests that treating prescription drugs as a stand-alone cost doesn’t work, and a recent study demonstrates that for every dollar spent on newer drugs, non-drug medical expenditures are cut by $7.20.

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