Community health center alliance sues California to preserve 340B drug pricing program

The Community Health Center Alliance for Patient Access (CHCAPA) filed a lawsuit in federal court contesting California’s plan to exclude the pharmacy benefit from Medicaid managed care, which would prevent community health centers from benefitting from the  Federal 340B Drug Pricing Program.

The CHCAPA contends eliminating the benefit would “strike a major financial blow” to health centers providing care to low-income communities and would divert the funds Congress intended to help these centers serve the communities.



“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 CHCAPA, a statewide organization of federally qualified health centers. “It creates additional hardship for Medi-Cal patients who already face a daunting health care bureaucracy every day as they seek to access care.”

The suit alleges the move will make for higher drug prices for the uninsured and will impact health care delivery, such as access to specialists through telemedicine services, dental care and transportation assistance in rural areas.

In May, Gov. Gavin Newsom withdrew his proposal to provide payments to nonhospital clinics for 340B pharmacy services, a move which could save $52.5 million in 2020-21. The decision was part of revisions designed to save money in the wake of the coronavirus pandemic, which assumes that a COVID-related recession will boost Medi-Cal enrollment by 2 million additional beneficiaries.

Gov. Newsom’s executive order, which is set to take effect Jan. 1, 2021, directs the Department of Health Care Services to move all pharmacy services from Medi-Cal managed care to a fee-for-service system. However, the state failed to implement a nonmanaged care reimbursement system for federally qualified health centers that meet federal requirements. It warns this decision may lead to the collapse of programs that centers provide, such as vaccinations. Under managed care, the centers could purchase these drugs at a discount and then negotiate market-rate payments from managed care plans.

“Medi-Cal patients depend on us for access to comprehensive primary and preventive health care,” said Leslie Abasta-Cummings, CEO of Livingston Community Health, which operates six health centers in the Central Valley. “This new system will have a devastating effect. It will force us to reduce the level of care we provide and the number of patients we are able to serve.”

The CHCAPA is asking the court to order the California Department of Health Services to exclude health centers from the Medi-Cal pharmacy transition unless a valid reimbursement plan for federally qualified centers is in place.

“Excluding our centers from the 340B Program will jeopardize patients’ access to care, increase risk for health problems and raise costs,” said Ronald E. Castle, CEO at Community Health Centers of the Central Coast, Inc. “The impact of this pharmacy transition is frightening and devastating to the health outcomes of our patients.”

The suit was filed by Hanson Bridgett and the Law Offices of Regina M. Boyle. It names William Lightbourne, director of the California Department of Health Care Services, and was filed in California Eastern District Court. The suit pursues injunctive relief related to Medi-Cal reimbursement on behalf of Avenal Community Health Center and other health clinics.