A state of California benefits identification card
CMS again asked a federal district court to dismiss California 340B health centers’ lawsuit over the state’s transfer of Medicaid managed care drug benefits to Medicaid fee for service.

CMS Asks Court Again to Dismiss 340B Health Centers’ Suit Over Medicaid Drug Benefits Transfer

The U.S. Centers for Medicare & Medicaid Services (CMS) last week again asked a federal district court in Sacramento to dismiss a group of California health centers’ claims for relief over CMS’s approval of the state’s transfer of Medicaid managed care drug benefits to Medicaid fee for service (FFS).

CMS initially asked the court in March to dismiss Community Health Center Alliance for Patient Access’ (CHCAPA) complaints against it. CHCAPA wants the court to enjoin the state Medicaid program, Medi-Cal, from continuing to implement the drug benefits transfer, called Medi-Cal Rx, which began early this year. The health centers say the transfer illegally deprives them of millions of dollars of revenue on billings for 340B purchased drugs. They are suing both Medi-Cal and CMS.

CMS told the court in March it “has no authority to second-guess California’s decision.”

CHCAPA responded in papers filed in the case late last month that the court should hold CMS “accountable for failing to ensure that the State of California complied with federal law in administering its Medi-Cal program” with respect to the health centers.

Federal law sets specific reimbursement standards for health centers that the state is ignoring with CMS’s blessing, the health centers said. By asking the court to dismiss the claims against it, CMS is trying “to sweep its errors under the rug,” the health centers said.

CMS last week Friday replied to the health centers’ April court filing.

“It is now abundantly clear that this lawsuit is not really about plaintiffs securing the reimbursement to which they are entitled under” federal law, CMS said. “Rather, plaintiffs are offering up any colorable theory in a last-ditch attempt to upend Medi-Cal Rx. That is because Medi-Cal Rx prevents them from negotiating with managed-care plans for potentially higher reimbursement than that provided under” federal law,” it said. “Plaintiffs’ gambit is unavailing. This action should be dismissed.”

All briefs in the case appeared to have been filed. U.S. District Judge Troy Nunley has not yet said if he will schedule oral arguments or decide the case solely on the pleadings.