national medicaid outpatient drug expenditure and utilization data are available from two sources : cms ' medicaid statistical information system ( msis ) , and the medicaid drug rebate program data files . since 1999 , all states are required to submit electronically certain fields of claims data from their medicaid claims processing systems to cms ' msis . data files containing utilization and expenditure data on prescribed drugs from the drug rebate program beginning in federal fiscal year ( ffy ) 1996 can be accessed at internet address : http://www.cms.hhs.gov/medicaid/msis/msis99sr.asp 
 . outpatient drug expenditure , but not utilization data , are also available through the quarterly medicaid statement of expenditures ( cms-64 ) . figures 1 and 2 display trends expenditure data on medicaid prescribed drugs under ffs payment arrangements . between ffys 1985 and 2001 , medicaid ffs expenditures for prescribed drugs increased from $ 2.3 to $ 24.7 billion , approximately a 10-fold increase . during the same period , medicaid ffs expenditures for all service types increased from $ 37.5 to $ 216.2 billion , slightly less than a 6-fold increase . between ffys 1997 and 2001 , medicaid ffs prescribed drug expenditures nearly doubled from $ 12.4 to $ 24.7 billion . during the same period , total medicaid expenditures increased from $ 160.3 to $ 216.2 billion , a growth of 35 percent . in ffy 1985 , prescribed drug expenditures in ffs comprised about 6 percent of total ffs medicaid expenditures . by ffy 2001 , in that same year , the medicaid ffs program provided pharmaceuticals to over 20 million beneficiaries . twenty - two percent of the increase in total medicaid expenditures between ffys 1997 and 2001 was accounted for by increases in expenditures for ffs prescribed drugs . figure 3 displays ffs medicaid prescribed drug expenditures by age in ffy 2000 , and figure 4 shows the percent change by age in ffs medicaid drug expenditures between ffys 1999 and 2000 . beneficiaries age 65 or over accounted for the largest share of total medicaid ffs prescribed drug expenditures in ffy 2000 ( 32 percent of the total ) . beneficiaries age 45 - 64 accounted for 30 percent of the total medicaid ffs prescribed drug expenditures followed by beneficiaries age 21 - 44 ( 26 percent of total ) , and beneficiaries age 0 - 20 ( 12 percent of the total ) . between ffys 1999 and 2000 , medicaid ffs expenditures for prescribed drugs increased by 20 percent for the age group 65 or over . age group 45 - 64 beneficiaries experienced the greatest increase in medicaid ffs prescription drug expenditures between ffys 1999 and 2000 ( 26 percent ) followed by the age group 0 - 20 ( 18 percent ) , and the age group 21 - 44 ( 18 percent ) . the following information relates to the medicaid ffs population for ffy 2001 ( october 1 , 2000-september 30 , 2001 ) , unless otherwise stated ( figure 5 ) . this section looks at the 10 states with the highest ffs prescribed drug expenditures in ffy 2001 . prescription payment data in medicaid ffs includes services to individuals in primary care case management . the composition and characteristics of the beneficiaries vary by state , in large part because the proportion of beneficiaries in capitated m+c varies by state . because most beneficiaries in capitated m+c are children and non - elderly adults , states with predominantly ffs populations will have a disproportionate number of elderly medicaid beneficiaries included in the data reported . there were $ 14.1 billion in ffs pharmaceutical expenditures for the top 10 states in ffy 2001 . the $ 14.1 billion figure represented 57 percent of the total ffs medicaid prescribed drug expenditures for that year . california had the greatest amount of prescribed drug expenditures at $ 3.1 billion followed by new york at $ 2.9 billion . florida was third in expenditures at $ 1.5 billion , slightly more than one - half of that of california . missouri was tenth in expenditures at $ 0.5 billion , less than one - fifth that of the top two states , california and new york . figure 6 shows the relationship between percent of the medicaid population who were ( age 65 or over ) by state , and the average number of prescriptions per medicaid beneficiary . figure 7 demonstrates the average number of claims per ffs beneficiary for the top 10 states . the number of pharmacy beneficiaries listed represents medicaid enrollees who received at least 1 prescription through a state 's ffs program . new jersey had the highest average number of prescriptions per beneficiary in 2001 at 33 , followed by ohio at 28 , and massachusetts at 23 . there appears to be a relationship between percent aged in the medicaid population and ffs pharmacy utilization ( figure 8) ; however this relationship is not necessarily a simple linear one . medicaid ffs beneficiaries ( age 65 or over ) accounted for 14 percent of the population and 33 percent of the expenditures . new jersey had both the highest average number of prescriptions per beneficiary and the highest percent aged in the medicaid population among the top 10 states . texas was lowest in average claims per beneficiary and third lowest in percent aged among the top 10 states . the medicaid drug rebate program operates according to the statutory requirements found in section 1927 of the social security act ( social security administration , 2003 ) . states invoice pharmaceutical manufacturers for both innovator or brand - name drugs , as well as non - innovator or generic drugs . while other states have established state supplemental rebate programs , california is the only state that showed an appreciable collection in ffy 2001 . during that year , the state of california collected additional state rebate amounts that totaled 7 percent of their entire pharmacy expenditure ( figure 8) . in ffy 2001 , nationwide , the federal rebate program collected approximately $ 4.9 billion . the average payment per prescription nationwide was roughly $ 55 without the rebate . when the federal rebate program is taken into consideration , the average cost per ffs medicaid prescription nationwide was reduced by approximately 20 percent to $ 44 .
the findings show that with the development of a multitude of safe and effective drugs during the later part of the 20th century and the beginning of the 21st century , drugs are , as never before , a true mainstay of medical treatment . 
 cms continues to monitor drug utilization and expenditures in all of its programs in order to ensure that care is rendered in a cost - effective manner that is beneficial to the patient . 
 this highlight summarizes trends in drug expenditures and utilization in the medicaid program .