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Pharmacy Groups Sue Over Medicaid Cuts in Three States
The National Law Journal
October 05, 2009
Pharmacy groups are suing California, New York and Washington, alleging the states' reimbursements for prescription drugs under the Medicaid program are too low. They warn that pharmacies may be forced to terminate their Medicaid contracts.
A fourth lawsuit -- this one against Minnesota -- is expected to be filed soon.
The states are accused of improperly reducing their reimbursement rates in response to the new Average Wholesale Prices (AWP) for prescription drugs -- the published benchmark of drug costs -- which were themselves reduced on Sept. 26. While the AWP varies for different drugs, it went down, on average, by 4 percent.
Pharmacies argue that the AWP does not reflect actual wholesale prices paid by pharmacies for drugs. So while the AWP is going down, and their Medicaid reimbursements are going down, the prices that pharmacies pay for drugs are, in fact, going up, the plaintiffs contend.
The plaintiffs include the National Association of Chain Drug Stores, the National Community Pharmacists Association and other smaller pharmacy groups, which filed three separate lawsuits in federal courts in California, New York and Washington on Sept. 29.
"There's a lot at stake," said Don Bell, general counsel for the chain drug store group, who estimates Medicaid reimbursements to pharmacies will be cut by more than $200 million annually under the new AWPs. "We're concerned that pharmacies will be forced to cut back services, drop out of Medicaid or even go out of business."
If pharmacies do drop Medicaid patients, Bell argued, that would undermine patient access to pharmacies. "The basic claim is that the rates are insufficient to satisfy federal requirements regarding patient access to pharmacies," he said.
Bell hopes the lawsuits will persuade the states to readjust their rates. "We're not asking them to increase our reimbursement -- not even to budget more. We're simply saying that they should offset these artificial reductions in the AWPs to keep our reimbursement whole."
The governor's office in California declined comment. The governor's office in New York was unavailable to comment. And the governor's office in Washington issued this statement: "Our attorneys are still examining this lawsuit, but we don't believe it has merit as our state has not altered its payment practices toward pharmacies." Responses have not yet been filed to the lawsuits.
The suits allege that the three states are violating the Social Security Act, that states must obtain approval from the Centers for Medicare and Medicaid Services for changes to reimbursement, and that the cuts resulting from the AWP reductions were not approved.
In a statement, Bruce Roberts, CEO of the National Community Pharmacists Association, said that independent community pharmacies frequently serve urban or rural areas where a disproportionate share of Medicaid beneficiaries live. In some of these communities, the pharmacy is the only health care provider for miles around. "Left unchecked, these unfair cuts could push some community pharmacies to the breaking point," he warned.
The suits are Washington State Pharmacy Association v. Gregoire in the Western District of Washington, Pharmacists Society of the State of New York v. Paterson in the Northern District of New York, and National Association of Chain Drug Stores v. Schwarzenegger in the Central District of California.
