340B program advocates hold a die-in outside New York Gov. Kathy Hochul's office
New York state Sen. Robert Jackson (center, holding green sign) participated in a "die-in" outside of Gov. Kathy Hochul's office on Tuesday to protest the scheduled transfer of Medicaid managed care drug benefits to Medicaid fee for service on Saturday.

As April 1 Deadline Looms, NY Health Centers Urge Courts to Stop Medicaid Pharmacy Benefit Transfer

If New York State transfers Medicaid managed care drug benefits to Medicaid fee for service on Saturday as scheduled, “it will all but eliminate the savings that safety-net providers have realized through the 340B program and the revenues on which covered entities have relied to meet the health care needs of New York’s sickest and poorest residents,” two New York health centers told a state trial court in New York City late last week.

Harlem-based Heritage Health and Housing and Buffalo-based Evergreen Health filed their lawsuit March 24 against the New York State Department of Health and Acting Health Commissioner James MacDonald. They asked the court to grant a temporary restraining order and ultimately, permanently enjoin the state from implementing the move. The state told the court March 27 it will oppose the health centers’ request for a TRO.

Under Medicaid FFS, providers can only bill for 340B-priced drugs at acquisition cost, while under the managed care system, 340B providers can bill plans at negotiated rates above their purchase costs. 340B health centers and Ryan White clinics say they would lose at least $240 million in 340B-generated annual revenue if the change goes through and would be forced to close sites and cut services and staffing.

“Looking for a Solution to Keep the 340B Program Intact”

The lawsuit was filed amid murky prospects over whether the Medicaid drug benefits will remain in managed care as the April 1 transfer date looms, said a source close to the process, as Gov. Kathy Hochul (D) and state health officials seem determined to go forward with the so-called 340B carveout.

The governor and leaders from state Assembly and Senate are expected to meet this weekend to determine the fate of the carveout as part of negotiations on the state’s 2023-24 fiscal year budget.

“The Medicaid director and the Department of Health have given no indication that they’re going to stop this,” the source said.

Health centers are skeptical about Hochul and state Medicaid Director Amir Bassiri’s assurances that that they will be made whole financially after the drug benefit transfer.

“With all of their promises to make health centers whole, they haven’t gotten federal approval yet, and there’s no mechanism on how they’re going to distribute those resources,” the source said. “We have only verbal promises that they’re going to take care of us … but they still have not articulated a plan.”

“We have millions of Medicaid patients, and by flipping a switch on day one, and switching [the drug benefits] over to fee for service, we’re profoundly fearful of a situation like what happened in California happening here in New York,” the source said. “It was a mess. We’re looking for a solution to keep the 340B program intact.”

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