New York Gov. Kathy Hochul addressing the press
New York state 340B providers say they still hope Gov. Kathy Hochul (D) can be persuaded to embrace an alternative to the state's transfer of Medicaid managed care drug benefits to Medicaid fee for service.

New York Implements Medicaid Drug Benefits Transfer, 340B Entities Say Fight Isn’t Over

New York state on Saturday transferred Medicaid managed care drug benefits to Medicaid fee for service. Health centers and Ryan White clinics have vowed to keep fighting the change, which they say will cost them millions of dollars in 340B program savings.

Under Medicaid managed care, 340B providers can bill plans at negotiated rates above their purchase costs. Under Medicaid FFS, they can bill only at acquisition cost. State lawmakers delayed the consolidation of Medicaid drug benefits under FFS and under a new program name, NYRx, for two years to let the state and 340B providers try to reach a compromise.

California took similar action in 2021. Health centers there have sued in federal district court to reverse the change.

New York state’s new fiscal year began April 1, the same day at the drug benefit transfer. Gov. Kathy Hochul (D) and state Assembly and Senate leaders still are negotiating over the state’s fiscal year 2023-24 budget. The Senate’s proposed budget would move Medicaid drug benefits back to managed care, create a single state Medicaid drug formulary, and ensure that pharmacists get fees under managed care comparable to those under FFS. The Assembly’s budget would simply reverse the drug benefits transfer.

Hochul and state Medicaid director Amir Bassiri want the pharmacy benefits transition to move forward and have proposed providing tens of millions in additional Medicaid funds to compensate 340B providers for the change. Health centers and Ryan White clinics say the state’s plan to compensate them is murky and they still hope Hochul and Bassiri will accept the Senate compromise.

Two New York health centers sued last month to stop the benefits transition. A state trial judge last week denied their motion for a temporary restraining order. The judge order the state to file its response to the lawsuit on or before April 14.

340B stakeholders said they would continue meeting with state officials and legislators in the coming days to make their case, and explain what 340B services they might have to cut amid the lost revenue. Some opponents of the governor’s Medicaid drug transfer said state officials rushed to lock in the change rather than waiting for budget negotiations to play out. 

“The budget is not done and I think it was premature to move forward when the Assembly, Senate and the governor are still in the middle of budget negotiations,” said Mark Malahosky, vice president of pharmacy services at Trillium Health in Rochester. “It has not been decided that the carveout is going to remain intact once budget negotiations are done.”

He added, “the compromise is the best path forward for all stakeholders [giving them] most of what they’re seeking and it does so without completely decimating the health care safety net.”

Some New York 340B providers say they are already struggling with added paperwork and claims processing mix-ups in the wake of the change, and are worried they won’t get reimbursed for certain drugs under FFS.

In a news release Monday, Hochul’s office said, “In anticipation of NYRx being implemented, Governor Hochul committed $705 million in Medicaid dollars in her FY 2024 budget to ensure 340B health care providers that received critical funding through their pharmacy programs aren’t negatively impacted by the transition. Of the $705 million, the budget reinvests $30 million in state Medicaid funding to Ryan White HIV/AIDS programs, $250 million in state and federal Medicaid funding into Federally Qualified Health Centers, and $425 million in state and federal Medicaid funding into hospitals.”

Bassiri, in a March 30 op-ed in The Buffalo News, said “340B providers will still have access to reduced drug prices and will be reimbursed by Medicaid for those drugs. But the middlemen will no longer reap millions in profits.”

340B providers say state officials have yet to devise a plan to make them whole, and that any plan still needs federal approval. “We’re worried,” said a 340B pharmacy source with knowledge of the process. “As of today, we’re losing money and there’s nothing to offset that loss.”

“Extraordinary Rebuke”

According to western New York television news provider Spectrum News Buffalo, organizers of the June 4 Buffalo Pride Parade and Festival disinvited Hochul from attending due to her position on the drug benefit transfer. The New York Post called it an “extraordinary rebuke.”