February 28, 2014—The federal Centers for Medicare and Medicaid Services (CMS) has approved California Medicaid’s 2009 policy requiring 340B covered entities to “carve in” their Medicaid purchases and to pass their 340B discounts on to Medicaid by billing such drugs at no more than actual acquisition cost (AAC) plus a dispensing fee. [ms-protect-content id=”2799″]
The state and the AIDS Healthcare Foundation (AHF) are now sparring in a federal appeals court over what CMS’s Jan. 30 action means for a lower court’s permanent injunction last year barring the policy’s enforcement.
California lawmakers passed the 340B Medicaid carve-in and AAC billing mandates in August 2009 and the state Medicaid program, Medi-Cal, submitted a related Medicaid state plan amendment (SPA) to CMS that October. CMS approved the SPA last month, retroactive to Oct. 1, 2009.
After a lawsuit that AHF filed over the policy, a federal district judge in May 2013 permanently enjoined California from enforcing the carve-in mandate and AAC billing requirement. The court found that the state had acted without first obtaining approval from CMS for its SPA; 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. However, the judge dismissed AHF’s claim that the policy violated both the federal and state constitutions’ equal protection clauses because, under it, for-profit pharmacies receive a higher reimbursement rate, and therefore higher revenues, than 340B providers. The state appealed the decision to the Ninth U.S. Circuit Court of Appeals and AHF filed a cross-appeal.
Last October, state and national groups representing 340B providers sent a letter to CMS urging it to disapprove the SPA and to encourage Medi-Cal to develop a 340B shared savings arrangement. In its January letter of approval, however, CMS concluded that the state’s SPA “complies with all applicable requirements.”
In a Feb. 7 motion, the state asked the Ninth Circuit Court to vacate the injunction in light of CMS’s decision and to send the case back to the lower court for reconsideration. In the alternative, California asked the appeals court to temporarily suspend the injunction pending the resolution of the appeal. AHF opposed those motions in a Feb. 18 filing. [/ms-protect-content]