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Buffalo, N.Y.-based health center Evergreen Health and Harlem, N.Y.-based health health center Heritage Health and Housing asked a state court to halt Saturday's scheduled transfer of Medicaid drug benefits from managed care to fee for service.

N.Y. State Health Centers Sue to Stop April 1 Shift of Medicaid Managed Care Drug Benefits to Fee for Service

The clock is ticking down in New York state to the scheduled April 1 transfer of Medicaid managed care drug benefits to Medicaid fee for service—a move that 340B safety net providers say would result in financial disaster.

Evergreen Health, a federally qualified health center based in Buffalo, and Heritage Health and Housing, an FQHC based in Harlem, filed suit in state court on Friday to temporarily block the transition, The Buffalo News reported yesterday.

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 went through and would be forced to close sites and cut services and staffing at existing sites.

April 1 is both the date of the transfer and the date by which lawmakers and Gov. Kathy Hochul (D) must enact budget legislation for the state’s 2023-24 fiscal year. The state Assembly has passed budget legislation that would simply repeal the transfer. The state Senate has passed legislation that would keep Medicaid managed care drug benefits but require managed care plans and their pharmacy benefit managers to reimburse pharmacies at National Average Drug Acquisition Cost or the fee-for-service reimbursement rate plus a tiered volume-based dispensing fee. Managed care plans and PBMs also would have to use the fee-for-service preferred drug list in developing their formularies.

Hochul so far has resisted the push to stop the transfer.

The state health department told The Buffalo News in a statement yesterday, “Gov. Hochul’s FY 2024 budget makes the long-awaited transition back to a fee-for-service pharmacy system, which will create transparency in reimbursements to pharmacies, eliminate profiteering among health care intermediaries, leverage the state’s purchasing power to negotiate with drug manufacturers, streamline practitioner administration and reduce confusion for the Medicaid recipients themselves when they pick up their medication.”