New York state capitol building and plaza
A bill has been introduced in New York State to repeal the April 1 shift of state Medicaid managed care pharmacy benefits to Medicaid fee for service.

Key Lawmaker Introduces Bill to Protect NY Health Centers and Clinics from “Hundreds of Millions” in Lost 340B Savings

The chair of the New York Senate health committee has introduced legislation to repeal the April 1 shift of state Medicaid managed care pharmacy benefits to Medicaid fee for service. The state’s 340B health centers and Ryan White clinics say they will be crippled financially if the transfer is not stopped.

State Sen. Gustavo Rivera’s (D) bill, S 3466, was referred to his committee. It has not yet been scheduled for a hearing or vote. Rivera sponsored the same bill last year and a companion bill was filed in the state Assembly. Rivera has said if the pharmacy shift occurs 340B providers “will lose hundreds of millions of dollars they now use for patient care.”

While no companion bill was filed in the lower house this year, state Assembly health committee chair Amy Paulin (D) said during a recent radio appearance, “As chair I’m going to be pushing us to preserve 340B and the monies that are a part of that because otherwise we’re going to disrupt health care in New York.”

Key Deadline Approaching

New York’s fiscal year starts April 1, the same day that all Medicaid drug benefits are to be consolidated under a new state program, NYRx. If a deal is made to kill or change the transfer, it could happen in connection with approving the state budget.

Gov. Kathy Hochul’s (D) administration has said it wants the drug benefit transfer to go forward. The legislature authorized it in 2020 and it originally was scheduled to take place in 2021, but lawmakers voted in 2021 to pause it until 2023.

Under Medicaid managed care, reimbursement for 340B-purchased drugs is negotiated between the provider and plan sponsor. Under fee for service, reimbursement is acquisition cost plus a dispensing fee. Hochul, like ex-Gov. Andrew Cuomo (D) before her, says the transfer will give the state clout to negotiate more generous supplemental Medicaid drug rebates with manufacturers. Her administration also said in its fiscal 2024 proposed budget that “340B revenues … have been increasingly diverted to for-profit intermediaries and pharmacy benefit managers in managed care.”

Community Health Care Association of New York, which represents the state’s community health centers, has said that health centers alone will lose an estimated $260 million annually in revenue from 340B if the state proceeds with the transfer.

Hochul administration budget documents says the state will reinvest savings from the drug benefits transfer into health centers, Ryan White clinics, and hospitals to “backfill the loss of 340B revenues.” CHCANY says in a talking points document that although the administration “says they will hold health centers harmless … against the financial impacts of the carve out, we have yet to see a proposal that will ensure we have reliable, sustained funding to continue our programs.”

“We do not believe the state can keep us whole in the long-term, and as a result, if the 340B program in Medicaid goes away, patients will lose access to care—including much needed pharmaceuticals,” the group says.

One of the benefit transfer’s selling points is that it would bring all Medicaid reimbursed drugs back under a single state Medicaid drug formulary. The formulary, administered by the state Preferred Drug Program, applied to all Medicaid reimbursed drugs from PDP’s creation in 2005 through 2010. In 2011, lawmakers backed a Cuomo administration proposal to let managed care plans negotiate on their own with drugs companies.

In addition to preserving Medicaid managed care drug benefits, Rivera’s bill would once again give the PDP power to negotiate drug prices for all Medicaid reimbursed drugs—managed care and fee for service.

“Managed care plan enrollees would use their plan membership card for drug benefits,” a description of Rivera’s bill says. “Medicaid would bill each Medicaid managed care plan for the drugs provided to its enrollees and return the amount through the premium rate that the state pays the plans. This would be consistent with integrated care, care coordination, and ‘value-based’ payment models. It would more effectively hold the managed care plan or provider network accountable for the total cost of care, while still giving the health plan (and the state) the benefit of lower drug prices.”

A lawsuit is underway in federal district court in Sacramento, Calif., to reverse a similar consolidation of all California Medicare drug benefits under fee for service.