Drugstore Consortium Sues Delaware, Markell Over Reduced Medicaid Reimbursements

DHSS Secretary Rita Langraff said that the state is "disappointed that Walgreen’s will not serve Delawareans on the same terms that are acceptable to its competitors."

In response to reduced state reimbursements for Medicaid prescriptions, the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) decided to sue the state of Delaware, but Governor Markell stands by his budgetary decision.

Illinois-based Walgreen’s is the catalyst this legal fallout, after announcing that all its Happy Harry’s pharmacies in Delaware will drop out of the Medicaid program as a result of the state’s reduced rate for Medicaid recipients. Starting July 6, Medicaid participants will no longer be served at the Walgreens-owned drug stores.

Walgreen’s is a member of NACDS and NCPA, who filed a lawsuit against the Delaware Department of Health and Social Services (DHSS), Governor Jack Markell, and Rita Landgraf, Secretary of Delaware Health and Human Services (DHSS) with the District Court in Wilmington after discussions about Medicaid reimbursement cuts stopped in early June. The state was not informed about legal actions taken until it was already filed with the courts.

“Walgreen’s didn’t like the change to the reimbursement, so we met with company representative repeatedly and proposed reasonable compromises,” Markell said. “But rather than work together, Walgreen’s decided to cut off discussions, drop out of the Medicaid program and stop serving tens of thousands of Delawareans in this time of need.”

During negotiations, the reduced rate Delaware offered Walgreen’s would have saved the state $500,000, while still giving the corporation $18 million in revenue state funds. Walgreen’s turned down the offer.

The trade associations believe that Delaware was in violation of federal law by ignoring the negative impact that reducing the state reimbursement rate would have on patients’ access to quality care. They claim that the state failed to comply with the Delaware Administrative Procedures Act when they issued the cut.

“Patient access to pharmacy services will be in jeopardy if these cuts take effect,” said NACDS President and CEO Steven C. Anderson, IOM, CAE. “During these challenging economic times, Medicaid patients should not be on the losing end of the state’s attempt to reconcile their budget. If pharmacies are reimbursed at a loss, the patients also lose; and that loss can result in patients not receiving their medications and other health services from their neighborhood pharmacy so they can maintain their health and that of their families.”

DHSS Secretary Rita Landgraf criticized Anderson’s statements, saying, “Delaware’s Medicaid population has ample access to pharmacy services across the State from other pharmacies. We are disappointed that Walgreen’s will not serve Delawareans on the same terms that are acceptable to its competitors.”

Hundreds of other pharmacies, both corporate and independent, have agreed to the reduction of state funds. Some pharmacies include, but are not limited to Rite Aid, Eckerd, Shop Rite, Walmart, Super G, and Target.

Gov. Markell and Secretary Landgraf stand by their decisions, in spite of the governor’s view that these actions may be a method of intimidation.

Markell explained, “If these are negotiating tactics, they are not good ones. 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.”

A preliminary injunction was filed by the pharmacy groups with the District Court to stop reimbursement cuts until a judge reviews the case.

“We gave careful consideration to the change in reimbursement before it went into effect,” said DHSS Secretary Rita Landgraf. “We are confident that we made the right decision for Delaware, especially in light of the state’s fiscal challenges.

RELATED: Legislators Respond to Walgreens Medicaid Refusal