Pharmacy industry groups are suing the states of California, New York and Washington, claiming they have made unlawful cuts in Medicaid and have failed to ensure patient access to care and the quality of care.

Pharmacy, Medicaid, pharmacy reimbursement, AWP, average wholesale prices, National Association of Chain Drug Stores, NACDS, National Community Pharmacists Association, NCPA, California, New York, Washington, prescription drugs, Steve Anderson, Bruce Roberts, First DataBank, Medi-Span, Pharmacists Society of the State of New York, Washington State Pharmacy Association, Joseph Navarra, Jeff Rochon, Russell Redman

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Pharmacy groups sue three states over Medicaid cuts

September 30th, 2009

ALEXANDRIA, Va. – Pharmacy industry groups are suing the states of California, New York and Washington, claiming they have made unlawful cuts in Medicaid and have failed to ensure patient access to care and the quality of care.

The National Association of Chain Drug Stores, the National Community Pharmacists Association, state pharmacy organizations and community pharmacies on Tuesday filed federal lawsuits charging that the three states have not met their legal requirements to assure access to and quality of care for Medicaid recipients that's equal to what patients in the general public receive.

The groups also contend that those states violated federal and state laws with their decisions to not preserve pharmacy Medicaid reimbursement after reductions in published average wholesale prices (AWPs), a benchmark used to gauge drug costs.

First DataBank and Medi-Span lowered AWPs on September 26 in accordance with settlements of their fraud and conspiracy lawsuits. According to the pharmacy groups' suit this week, the Social Security Act required states to adjust reimbursements, but California, New York and Washington didn't act to prevent pharmacies from being reimbursed at below cost for Medicaid prescription drugs.

As a result, the groups say, the below-cost reimbursements may cause pharmacies to exit the Medicaid program for business reasons, reduce hours and services, or close, which threatens Medicaid patient care and access.

"Pharmacies provide vital medications and services to Medicaid patients that improve and save lives and help prevent higher long-term health care costs," NACDS president and chief executive officer Steve Anderson said in a statement. "Some private payers and some states already have taken action to adjust reimbursements appropriately, to maintain the quality and accessibility of pharmacy patient care and its benefits. Federal Medicaid law obligates the states, including California, New York and Washington, to do the same."

NCPA executive vice president and CEO Bruce Roberts stated that California, New York and Washington's failure to act on Medicaid pharmacy reimbursement "has produced a perverse outcome whereby underserved patients who need access to health care the most will get it the least."

"Independent community pharmacies frequently serve urban or rural areas where a disproportionate share of Medicaid beneficiaries live," Roberts explained. "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."

In addition, the pharmacy organizations claim that states must get approval from the Centers for Medicare and Medicaid Services for reimbursement changes and that the cuts stemming from the AWP reductions were not approved as required. Also, the plaintiffs argue that the cuts run contrary to the states' certifications that current reimbursement is the states' best estimate of actual acquisition cost, as required by federal law. The groups also raised some state-specific claims.

NACDS and NCPA filed as plaintiffs in the suits against California, New York and Washington. The Pharmacists Society of the State of New York filed as a co-plaintiff in the New York suit, and the Washington State Pharmacy Association and individual pharmacy companies filed as co-plaintiffs in the Washington suit.

"We have urged the administration to maintain the current payment level, understanding full well that for many independent pharmacies it is barely adequate to cover actual costs," commented Joseph Navarra, president of Pharmacists Society of the State of New York. "We considered this a reasonable and modest request made in the best interest of the state as well as patients who rely on public programs. Unfortunately, as pharmacy owners, we are now forced to review each prescription very carefully."

Jeff Rochon, CEO of the Washington State Pharmacy Association, noted that pharmacists "are on the front lines of our health care system."

"Commercial health care payers and Medicaid programs in some states have already adjusted pharmacy reimbursement necessary to maintain patient access to the essential care provided by pharmacies," Rochon stated. "If Washington Medicaid does not do the same, it can result in reduced access to medicine for our neediest and most vulnerable patients, ultimately leading to expensive emergency room visits and hospitalizations."

First DataBank, a subsidiary of Hearst Corp., and Medi-Span, a unit of Wolters Kluwer Health, were defendants in a class action filed in 2007, in which Medi-Span was charged with negligently publishing AWP information wrongfully inflated by First DataBank, a prior Medi-Span owner. Under the settlements in the case, First DataBank and Medi-Span agreed to reduce the AWPs of drugs to 120% of the wholesale acquisition cost on September 26.

Pharmacy industry groups this spring appealed the settlements, which were upheld in early September by a federal appeals court. Also this month, pharmacy groups asked U.S. Department of Health and Human Services secretary Kathleen Sebelius to intervene in the matter to ensure that state Medicaid programs adjust their reimbursement schemes to offset the lower rates.