AJMC Study Finds Medicaid Barriers to the Right Drugs May Cause More with Schizophrenia to Land Behind Bars

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A study in The American Journal of Managed Care finds Medicaid prior authorization requirements for newer antipsychotic drugs are associated with an increased likelihood that individuals with schizophrenia will be incarcerated for nonviolent drug offenses. The study comes amid media scrutiny over whether cutbacks in mental health actually save money, when other costs are taken into account.

FOR IMMEDIATE RELEASE JULY 22, 2014AJMC Study Finds Medicaid Barriers to the Right Drugs May Cause More with Schizophrenia to Land Behind Bars

PLAINSBORO, N.J. — Prior authorization rules adopted by Medicaid to limit access to newer drugs used to treat schizophrenia may result in more of these patients being incarcerated, raising questions about the “cost-effectiveness” of these formulary restrictions, to say nothing of the toll on the patients.

That is the finding of a new study published today by The American Journal of Managed Care, in which researchers examined survey data from 16,844 prison inmates and overlaid their responses with various Medicaid policies and data, as well as usage rates of atypical antipsychotics, the newer drug class that is frequently targeted by prior authorization requirements.

Atypical antipsychotics, which came into use in the 1990s, have been associated with lower rates of relapse. One of the challenges of prescribing them, as discussed in an earlier study in The American Journal of Managed Care, is that many patients only respond to one drug, and substituting less expensive drugs for a preferred version may result in relapse.

Both the Medicaid data, from 30 states, and the survey data were from 2004, a year when some states had begun to restrict access to atypical antipsychotics and some had not. Researchers found that states requiring prior authorization for atypical antipsychotics had less serious mental illness overall, but this advantage did not translate to the prison population. These states ended up with higher shares of inmates with psychotic symptoms than the national average.

The study concluded that prior authorization of atypical antipsychotics was associated with a 22 percent increase in the likelihood of imprisonment for schizophrenics, compared with the likelihood in a state without such a requirement.


According to the study, about a quarter of the inmates surveyed resided in states that had started prior authorization for atypicals in 2003. In these states, the share of the population with serious mental illness was lower than the national average (10.9 percent compared with 11.7 percent). However, the share of inmates who screened positive for psychotic symptoms was slightly higher in the states with restrictions: 17.8 percent, compared with 17.0 percent nationally. States with restrictions also had prison populations with higher inmate populations with a prior diagnosis of schizophrenia: 5.05 percent for these states, compared with 4.35 percent nationally.

Today’s study comes amid a wave of media scrutiny of the cost and consequences of failing to adequately provide for mental health care, including the nexus between shortchanging mental health and rising prison expenditures. An April headline on Vox, the a data-driven, Web-based news source, summed up a report from the Treatment Advocacy Center this way: “Jails, prisons hold 10 times more mental health patients than state hospitals.”

A May series appearing in USA Today, “The Cost of Not Caring,” found that a 94-day incarceration cost $30,258, roughly the same amount as a full year of housing, disability income and outpatient care for a person with a serious mental illness, which was $31,200. Just last week, The New York Times investigated violence in the New York City’s Riker’s Island prison suffered by those with mental illness.

In the policy discussion accompanying the findings, the authors note the United States spends $8.5 billion each year on persons with severe psychiatric disorders in jails and prisons, based on U.S. Justice Department statistics. The prison system, the authors assert, is an expensive way to deal with mental illness, especially when many of those incarcerated are nonviolent.

“These findings suggest that prior authorization requirements for atypical antipsychotics, which are designed to reduce healthcare costs, can result in increased expenditures for the criminal justice system,” the authors write. “Given the high cost of incarceration, these increased costs to the criminal justice system could easily offset any savings created by prior authorization requirements.”

"This paper demonstrates that our policies around schizophrenia may be penny-wise and pound foolish,” says lead author Dana Goldman, director of the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California. “Limiting access to effective therapy may save States some Medicaid money in the short run, but the downstream consequences -- including more people in prisons and more criminal activity -- could be a bad deal for society."

"The media has picked up on how incarcerating the mentally ill raises a range of troubling concerns, from the high cost of incarceration, to the inadequate treatment of mentally ill inmates, and the potential for self-inflicted harm among these patients,” says co-author Darius Lakdawalla, Quintiles Chair in Pharmaceutical Development and Regulatory Innovation, and a professor at the Schaeffer Center at USC. “At the same time, the American public is increasingly worried about untreated mental illness triggering violent behavior in the community. Our study suggests state Medicaid policies may be part of the solution to these problems."

About the Journal

The American Journal of Managed Care, now in its 20th year of publication, is the leading peer-reviewed journal dedicated to issues in managed care. Other titles in the AJMC family of publications are The American Journal of Pharmacy Benefits, which provides pharmacy and formulary decision makers with information to improve the efficiency and health outcomes in managing pharmaceutical care. In December 2013, AJMC introduced The American Journal of Accountable Care, which publishes research and commentary devoted to understanding changes to the healthcare system due to the 2010 Affordable Care Act. AJMC’s news publications, the Evidence-Based series, bring together stakeholder views from payers, providers, policymakers and pharmaceutical leaders in the areas of oncology, diabetes management, and immunology and infectious disease. To order reprints of articles appearing in AJMC publications, please call (609) 716-7777, x 131.

About the Schaeffer Center

The mission of the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California is to measurably improve value in health through evidence based policy solutions, research excellence, transformative education, and private and public sector engagement. The Center is a unique collaboration between the USC Sol Price School of Public Policy and the USC School of Pharmacy.

CONTACTS: Nicole Beagin (732) 604-1974 preferred for July 22, 2014

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