There's a high-stakes battle ongoing in Albany as New York prepares to implement a long-planned, cost-saving overhaul of its Medicaid pharmacy benefit program.
On one side, independent pharmacists are pushing for the transition to go through as planned April 1 – a change that would come with the state paying higher dispensing fees that would provide a boost to small pharmacies often stuck filling prescriptions at a financial loss under the current system.
But on the other side is a politically connected contingent of safety-net health care providers, opposed to the transition because it will disrupt their access to hundreds of millions of dollars from a federal program that props up money-losing, but crucial, services such as behavioral health.
In Western New York alone, it could threaten about $30 million in annual revenue across the area's health centers such as Evergreen Health, Community Health Center of Buffalo and Neighborhood Health Center.
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How it all shakes out over the next month will affect how some 7.7 million Medicaid members across the state access their pharmacy benefits.
Aside from saving money, the state argues this planned shift of the pharmacy benefit program out of managed care and back to a fee-for-service model has the potential to boost access for members, align coverage and improve transparency.
Critics are skeptical the state will save much money and also believe it could further fragment the health care system.Â
This controversial carve-out was originally planned under Gov. Andrew Cuomo, but the implementation was delayed two years ago when similar concerns were raised.
That delay is now coming to an end, and the battle over the carve-out is picking up steam as crunch time approaches.
Sen. Gustavo Rivera, chair of the Senate Health Committee, late last week introduced legislation that would block the transition due to the "unintentional harm" it would cause to certain safety-net providers.
The bill also claims it would maintain protections for pharmacy operations, though the Pharmacists Society of the State of New York said Rivera's legislation would lead to them taking a cut in payment while other providers are made whole.
More developments are likely in the month ahead, with one-house budgets due to be unveiled in a couple of weeks and the state budget deadline looming April 1 – the same day the carve-out is scheduled to take effect.
A necessary 'side hustle'
The reason the planned carve-out is controversial with certain safety-net health care providers is because it would hinder their ability to access revenue from the federal 340B program, which started three decades ago as a way for safety-net providers to stretch federal resources as far as possible to serve more patients.
In the program, manufacturers participating in Medicaid provide drugs at steep discounts to covered providers that serve vulnerable communities. The provider, often a hospital or clinic, then bills the retail cost of those drugs to the health plan, allowed to keep the difference between the discounted price and the reimbursed retail price. They then use that money to expand programming, bring in new services and cover gaps in care.
The planned carve-out would take those benefits and redirect them to the state. The state, in turn, has promised to create pots of funds to make the affected providers financially whole, though clinics have doubts about the state's ability to do that in a timely manner.
The funding is important to safety-net providers. Buffalo-based Evergreen Health counts on 340B to bring in about $14 million, or about 12%, of its annual $120 million budget, said Mike Lee, Evergreen's chief operating officer.
"This is $14 million of flexible resources that we can use because we're not getting enough reimbursement," Lee said. "The reality is this program helps prop up primary care, behavioral health, transportation, nutrition, dental, housing."
And that's really what the 340B program does, Lee said. It helps organizations such as Evergreen fill budget holes and fund services that are not sufficiently reimbursed.
Without 340B, local federal qualified health centers are "looking at a fiscal cliff," he said.
The state on Wednesday announced that 12 health care projects in Western New York were being funded, to the tune of about $49.6 million. Among the recipients: UPMC Chautauqua, Endeavor Health Services and Community Health Center of Buffalo.
That is certainly true at Neighborhood Health Center, which has six sites across Western New York and treats about 29,000 people a year on a $40 million annual budget.
It counts on 340B for more than $3.5 million, or about 9%, of its budget, noted President and CEO Joanne Haefner.
"The 340B reinvestment is a side hustle that primary care providers have to do because primary care doesn't get paid well enough in New York State," she said.
Several of Neighborhood Health Center's departments struggle to sustain themselves. The 340B dollars have helped support the organization's behavioral health, dental and obstetrics and gynecology departments, Haefner said.
If the carve-out does go through, Haefner said Neighborhood Health Center plans to live off its savings for a while as it waits for the state's promised payments to make community health centers whole.
But, she cautioned, "I don't have a year and a half of reserves to keep our organization the same size that it is right now."
The state's rationale
Amir Bassiri, the state's Medicaid director, said there are four main reasons for the long-planned transition of the Medicaid pharmacy benefit program from managed care to the fee-for-service model, called NYRx.
For one, he said, NYRx should improve alignment and coverage. It would have one list of prescription drugs covered by a plan. That would create more consistency, since each managed care plan currently has its own formulary, Bassiri said.
Second, he believes the transition would boost access for the state's 7.7 million Medicaid members since NYRx has a statewide network of more than 5,000 enrolled pharmacies.
The transition also would give the Medicaid program enhanced purchasing power, with the state negotiating with drug manufacturers for additional savings, Bassiri said.
Last, he said the switch would "inject transparency and program integrity into the Medicaid pharmacy program." One longstanding concern, Bassiri noted, is over intermediaries such as pharmacy benefit managers that have siphoned money from the program. He cited a lawsuit last summer by Attorney General Letitia James against CVS Health Corp., which alleged CVS required New York safety-net hospitals and clinics to exclusively use a CVS-owned company, Wellpartner, to process and obtain federal subsidies on prescriptions filled at CVS pharmacies.
"What we've seen is that the intermediaries who are not delivering services to Medicaid members – the PBMs, the third-party administrators – have increasingly perpetuated the rapid growth of the program as well as diverted the funding intended for safety-net providers away from them," Bassiri said. "And this has been documented both in New York and around the country, especially recently."
Given that, Bassiri said the state's plan to give money back to the safety-net providers to account for their 340B losses is a "far more efficient and direct way to reimburse those providers."Â
For the hospitals that would be affected, the state is planning a 5% increase in Medicaid reimbursement rates.
"We are very committed to ensuring that the providers are held harmless in every way possible," Bassiri said. "Our priority is ensuring that there's no disruption to the services in these communities, and we believe that the reinvestment should mitigate any risk to that occurring."Â
Independent pharmacies
One group hoping the transition to NYRx goes through as planned is the Pharmacists Society of the State of New York.
At least one reason is because the state will pay higher dispensing fees to pharmacies than what they are getting out of the managed care companies. Under the current Medicaid managed care model, the Pharmacists Society notes that pharmacies are paid a rate that often has them filling prescriptions at a financial loss.
Brad Arthur, pharmacist and owner of Black Rock Pharmacy in Buffalo, also believes the transition could be good for Medicaid members by putting their pharmacy benefit on one formulary, establishing consistency.Â
With all the different formularies under managed care, Arthur said it's often up to the pharmacy at the point of sale to help the members understand what drugs are covered.
"It's very confusing for patients," he said. "And oftentimes, the only opportunity is to navigate that while they're standing there in the pharmacy."
Arthur understands why safety-net providers are upset about the planned carve-out, noting those providers are doing valuable work and expanding services for vulnerable populations. But he's also seen up close the funds that managed care entities have extracted from the system and knows more transparency is needed.
"I understand why these entities are up in arms because it's a lot of money, and their budgets are dependent upon these funds in order to continue to provide services," he said. "And I don't begrudge them for that. I just wish the government would come up with a better way of doing it."
Jon Harris can be reached at 716-849-3482 or jharris@buffnews.com. Follow him on Twitter at @ByJonHarris.