A federal court this week handed down an injunction to stop two new reductions on payments to pharmacies in California's Medi-Cal program, according to the California Pharmacists Association (CPhA).

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Injunction halts pharmacy payment cuts in Calif.

May 7th, 2010

SACRAMENTO, Calif. – A federal court this week handed down an injunction to stop two new reductions on payments to pharmacies in California's Medi-Cal program, according to the California Pharmacists Association (CPhA).

The association said Judge Christina Snyder of the U.S. District Court in Los Angeles issued a preliminary injunction on Wednesday to suspend the cuts, which were included in last year's state budget and threatened to reduce access to prescription drugs for Medi-Cal patients.

"We obviously are very pleased with the ruling from Judge Snyder," CPhA chief executive officer Lynn Rolston said in a statement.

The lawsuit was filed in 2009 on behalf of all pharmacies in California and the millions of Medi-Cal beneficiaries, and the legal effort was led by attorney Lynn Carman of the Medicaid Defense Fund and the CPhA. The pharmacies argued that the cuts would reduce pharmacy payments to a level that would force them to stop serving Medi-Cal patients or drive them out of business, compromising patient care, CPhA said.

"If implemented, these cuts would have resulted in the demise of the entire Medi-Cal pharmacy program," Carman said in a statement after the injunction was issued.

CPhA said Snyder's ruling was consistent with rulings she issued in 2008 and 2009 blocking other reductions to Medi-Cal providers, including pharmacies. The association noted that as with the earlier decisions, this week's ruling is based on a finding that the California legislature didn't meet requirements of federal law in enacting the cuts. The prior rulings were appealed by the state and have been upheld by the Ninth Circuit Court of Appeals, CPhA reported.

"We recognize the serious and ongoing problems facing the state as it tries to balance its budget," Rolston commented. "Over the last two years, the pharmacists and pharmacies of California have tried to present realistic solutions that would support the state's efforts without driving pharmacies out of business. Unfortunately, given the immediacy of each of the last two budget crises, we were not able to get the attention of the administration. Regardless, CPhA and other retail pharmacy interests again are ready to work with the administration and legislature to work out a solution that works for the state, Medi-Cal beneficiaries and Medi-Cal providers."

The drug store industry has seen rising pressure on pharmacy reimbursements as many state governments, short of revenue in the wake of the recession, scramble to find ways to plug holes in their budgets.

In late April, the National Association of Chain Drug Stores sent a letter to congressional leaders that called on lawmakers to extend the increase to the Federal Medical Assistance Percentage (FMAP). NACDS noted that the expiration of the funding hike would impact already-squeezed state budgets and result in additional cuts to state Medicaid programs.

Also last month, the National Community Pharmacists Association urged the Centers for Medicare and Medicaid Services to reject Mississippi's plan to trim Medicaid pharmacy reimbursements by 15% for the rest of the fiscal year. And Walgreen Co. said that as of April 16 it would stop accepting new Medicaid patients in its 121 Washington stores because of cutbacks in pharmacy reimbursement by the state.

The pharmacy payment issue also recently heated up in Canada. As part of a health care reform strategy, the Ontario government plans to cut the pharmacy reimbursement rate for generic drugs paid for by the Ontario Drug Benefit Plan from 50% of the branded price to 25%. The plan drew a quick response from Canadian chain drug retailers, with Katz Group's Rexall chain instituting a hiring freeze and Shoppers Drug Mart cutting store hours in some locations.