Sherman Heights Family Health Center building
California health centers want a federal court to stop a state Medicaid policy that deprives them of millions of dollars in 340B drug reimbursement.

California 340B Health Centers Say State “Essentially Admits” Flaws in Medicaid Drug Reimbursement Change

California health centers told a federal judge last week that the state’s arguments for dismissing the centers’ lawsuit to reverse a new state Medicaid policy that deprives them of millions of dollars in 340B drug reimbursement lack merit.

Community Health Center Alliance for Patient Access (CHCAPA) said the state Department of Health Care Services “essentially admits” that when it implemented the policy it “chose to ignore federal requirements that specifically apply to FQHC reimbursement.”

CHCAPA filed a brief on March 18 in U.S. District Court in Sacramento responding to DHCS’ motion last month urging the court to toss out CHCAPA’s lawsuit.

CHCAPA wants the court to stop DHCS from implementing the consolidated Medicaid drug benefit program, called Medi-Cal Rx, with respect to health centers until DHCS can show that the new system reimburses heath centers for their actual and reasonable drug acquisition and dispensing costs. CHCAPA, which represents 31 federally qualified health centers that participate in the 340B program, says federal law requires state Medicaid programs to pay for health center services at 100% of their average costs.

In its court filing last week, CHCAPA said that rather than address its arguments supporting health centers’ congressionally mandated right to cost-based reimbursement, the state in its February filing in the case took the court “on a frolic and detour about steps that plaintiffs can purportedly take in order to avoid the state’s continuing violation of their federally secured right to reimbursement.”

“Presumably, plaintiffs could also hold bake sales or crab feeds in order to make up for the shortfall created by the state’s implementation of Medi-Cal Rx, but that is not the point,” CHCAPA told the court. “The point is that the state has a legal obligation to comply with federal law, which includes reimbursing FQHCs for pharmacy services they provide to Medi-Cal patients. Federal law also gives FQHCs the benefit of the 340B drug discount program to ensure that FQHCs would be able to provide pharmacy services to their patients, while ensuring the state could not siphon FQHC grant funds intended for the uninsured.”

CHCAPA is also suing the U.S. Centers for Medicare & Medicaid Services (CMS) for approving the state’s transfer of Medicaid managed care drug benefits to Medicaid fee for service (FFS). CMS last week asked the court to dismiss CHCAPA’s lawsuit.

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