May 7, 2013—A federal district judge has ordered California to stop requiring 340B health care providers to “carve in” all Medicaid patients and to bill the state for 340B drugs given to such patients at actual acquisition cost (AAC).
Acting in a case brought by the AIDS Healthcare Foundation (AHF), U.S. District Judge Manuel L. Real issued a permanent injunction on May 3 forbidding the state to enforce the 340B provisions of a 2009 budget-balancing law.[ms-protect-content id=”2799″] That law requires 340B providers to use only 340B drugs for Medicaid beneficiaries and it reimburses them for those drugs at AAC plus a dispensing fee. The state reimburses non-340B providers for the same drugs dispensed to Medicaid patients at significantly higher rates.
AHF, the nation’s largest nonprofit HIV/AIDS health care provider, operates HIV-AIDS clinics and AIDS specialty pharmacies in four states and the District of Columbia. It originally sued California over the 340B reimbursement change in late 2009. Judge Real dismissed AHF’s complaint in its entirety in March 2010. A federal appeals court, however, partially reversed his decision in a 3-0 ruling in November 2011 and sent the case back to him for reconsideration.
In his decision last week, Judge Real held that the state altered how its Medicaid program, known as Medi-Cal, reimbursed 340B covered entities in violation of the federal Medicaid Act and its regulations. Specifically, the court found that the state acted without first obtaining approval from the Centers for Medicare and Medicaid Services; that it did not consider factors of efficiency, economy, and quality of care and Medi-Cal beneficiary access to health care services; and that it did not consider the costs that 340B safety net providers would incur in dispensing drugs to Medi-Cal beneficiaries.
“The federal court has slapped down yet another California state effort to fix its budget problems on the backs of the poor and the powerless,” said AHF attorney Laura Boudreau. “This is an important victory for safety net providers throughout California and nationwide. Thanks to the court’s ruling, state Medicaid agencies cannot single out safety-net providers, pay them less for the same services than they pay big pharmacies … all the while expecting them to bear the burden of caring for the state’s sickest and neediest residents. By invalidating the law, 340B providers are restored to a more level playing field, giving them the ability to carry on with their vital missions.”
The state attorney general’s office, which represented Medi-Cal in the case, did not respond to a request for comment, including on whether it will appeal the decision. There is no indication that the state asked Judge Real for a stay.[/ms-protect-content]