Community health centers in California on Thursday sued to stop the state from absorbing health centers' 340B drug discount program savings under Gov. Gavin Newsom's bulk drug-purchasing plan.
Newsom has advanced a plan that would transition the state's drug purchasing from Medicaid managed care to fee-for-service, which he thinks will consolidate the state's negotiating leverage and help lower prescription drug costs. But community health centers say they would lose 340B savings that they use to sustain their operations. The changes are scheduled to go into effect on Jan. 1.
"The state's ill-conceived action threatens the ability of many community health centers to provide critical programs to uninsured and low-income families across the state," said Anthony White, president of the Community Health Center Alliance for Patient Access.
The state has tight controls on the money hospitals can collect through the discounts under Medicaid fee-for-service, reimbursing them at the provider's discounted 340B rate plus a small dispensing fee.
But providers have much wider berth in billing Medicaid managed-care plans, where the majority of California's Medicaid population is enrolled. Hospitals and clinics can bill the insurers for their own negotiated rates, typically higher than what they pay under 340B and sometimes leading to thousands of dollars in profits.
Community health centers are asking to be excluded from the Medicaid fee-for-service transition. The state offered a $105 million pool of state and federal funds to help compensate health centers for lost revenue, but health centers said the solution is inadequate because it is only approved for one fiscal year and is impossible to distribute fairly.
The Community Health Center Alliance for Patient Access said it presented potential solutions to the state health department, but on Oct. 5 the state declined to make changes.