Pharmacy Groups Sue Over Medicaid Reimbursement

$800 million budget gap in Delaware leads to a 12.5% reduction in reimbursements to pharmacies. Walgreens to drop out of Medicaid, pharmacy trade groups sue Delaware. Many drugs now set below a pharmacy's break-even cost.

State officials said Thursday they will not be intimidated by a federal lawsuit challenging a reduction in Medicaid reimbursements to Delaware pharmacies.

The lawsuit was filed this week in federal district court in Wilmington by the National Association of Chain Drug Stores and the National Community Pharmacists Association. The two trade groups are seeking a preliminary injunction to halt the two-percent reduction, which took effect April 1.

"This is an issue for the industry in Delaware," said Rick Ball, an attorney representing the trade associations.

While the associations represent almost all of the pharmacies in Delaware, Ball said members are free to decide whether they want to continue serving Medicaid patients.

Gov. Jack Markell said the lawsuit will not intimidate his administration into paying Walgreens higher reimbursement rates.

"If these are negotiating tactics, they are not good ones," Markell said in a prepared statement. "We are always open to conversation, but we will not be bullied, especially when we are asking so many individuals and organizations in Delaware to share in the sacrifices necessary to close an $800 million budget gap."

The lawsuit names Markell and state health and social services secretary Rita Landgraf as defendants, along with the Department of Health and Social Services.

In their complaint, the trade groups claim the reimbursement reduction violates both state and federal law, in that it will reduce the quality of care for Medicaid patients and fails to comply with the care and access requirements of the Social Security Act.

The plaintiffs also claim state officials failed to get approval from federal Medicaid officials before implementing the change, and violated their own administrative procedures.

"The only factor considered by the governor or the department in adopting the April 1, 2009 budget cuts was the state's budgetary constraints," the complaint states.

The industry groups claim that the rate reduction has resulted in the reimbursements for many drugs to be set at a level below a pharmacy's break-even cost.

"Faced with the certainty of dispensing Medicaid drugs at a loss, a number of pharmacies will refuse to accept new Medicaid patients," the lawsuit warns.

State officials contend that even with the loss of Walgreens, Medicaid recipients will still be able to get prescriptions filled at more than 100 other pharmacies.

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