OLYMPIA, Wash. — The National Association of Chain Drug Stores (NACDS), the Washington State Pharmacy Association (WSPA) and the National Community Pharmacists Association (NCPA) filed a legal brief this week with the Washington State Court of Appeals, challenging the state’s refusal to reimburse community pharmacies for the costs of providing care and services to disadvantaged Medicaid patients. The legal brief states that “because Washington’s fees do not reimburse pharmacies for their costs, those fees are dramatically lower than those of any other state in the country.”

NACDS, WSPA and NCPA argue that the state is reimbursing pharmacies far less than it costs pharmacies to serve the state’s Medicaid patients. Under the federal Medicaid program, each state sets fees to reimburse pharmacies for dispensing medications to low-income people. Those fees must compensate pharmacies for the actual costs incurred, but Washington State’s do not. The brief argues that it is unlawful and inappropriate for the state to reimburse pharmacies below their costs.

In 2016, the Centers for Medicare and Medicaid Services (CMS), which administers Medicaid reimbursements, put in place a new rule changing how states must reimburse pharmacies. A key part of the rule indicates that states must reimburse pharmacies for their actual costs in dispensing drugs to Medicaid beneficiaries. The CMS rule requires states to reimburse pharmacies for the costs of purchasing drugs wholesale, i.e., ingredient costs, and for the dispensing fees to Medicaid patients. The dispensing fees must cover other costs of serving Medicaid patients, including reimbursing pharmacies for the costs of dispensing medications.

The legal brief argues that Washington State did not comply with the new CMS rule for cost-based dispensing fees and instead kept dispensing fees the same. In order to do this, it had to rely on data from private insurance plans—which do not track actual costs, as required by the CMS rule. Washington State kept in place the same dispensing fees it established many years ago, before the CMS rule was put in place.

NACDS, NCPA and WSPA also sent a letter to CMS asking the agency to “delay no longer in requiring Washington to comply with federal Medicaid reimbursement law like other states.”

The legal brief maintains that Washington State’s decision to continue to impose insufficient dispensing fees is based on a misreading of the requirements of the federal rule and an unfair selection of data to ensure a fixed outcome.

The brief states that Washington State’s actions “exceed its authority and are arbitrary and capricious.” The brief notes that Washington’s “rule and decision to pay below-cost dispensing fees are unlawful” and the state should be ordered “to set new rates that follow federal law.”

In March of 2017, NACDS, WSPA and NCPA sued the State of Washington to stop a “substantively and procedurally flawed” rule that would pay community pharmacies below the actual cost to dispense Medicaid prescriptions. The rule could jeopardize reliable patient access to medications responsible for ensuring patient health and lead to more costly forms of care that result from untreated conditions.

The CMS rule specifically requires states to implement new professional dispensing fees that cover pharmacies’ costs of dispensing effective April 1, 2017. Therefore, the Court should order that the State must, retroactive to April 1, 2017, establish and pay new professional dispensing fees that properly reflect pharmacies’ costs of dispensing medications and providing related services to Medicaid patients.