Plan to save California money could take health care away from most vulnerable patients
Kevin Arias-Romero, 25, a lifelong Mendota resident, has been going to United Health Centers in his hometown since he was a child.
Most residents in the rural, impoverished city in western Fresno County depend on the health center for their care and medications.
“It would be a huge loss if we didn’t have United Health Centers around,” Arias-Romero told The Bee. “It’s not just a clinic, it’s not just a building, it’s a vital part of our community.”
The most underserved patients — young and old, including migrant workers and the uninsured — in California could lose access to critical health care services under looming changes that leaders say would put federally qualified health centers (FQHCs) at risk.
As California plans to transition all pharmacy services for Medi-Cal managed care to Medi-Cal Rx, a fee-for-service benefit system, leaders say health centers would lose “hundreds of millions” in savings they currently see from a federal drug discount program, known as 340B, according to interviews, a federal lawsuit and proposed legislation.
Leaders say their health centers purchase drugs at a discount through the 340B program, which was put in place by Congress years ago. Then they are able to negotiate reimbursements from managed care providers at a market price, using savings to offer medications to patients at almost no cost, as well as to be able to provide a range of other services, such as the current COVID-19 testing and vaccination.
Without those savings, diabetic patients might not have access to life-saving medications like insulin, and education programs and free transportation for patients could disappear.
The transition impacting the drug discount program also comes in the wake of drug manufacturers unlawfully refusing to provide discounts to health centers and hospitals under the 340B program, according to a December letter from more than a dozen attorneys general, including California’s.
State officials told The Bee they are trying to better understand the impact the switch could have once implemented.
Health centers and the communities they serve would be “greatly impacted” by the changes, said Justin Preas, deputy chief executive officer for United Health Centers.
“Once this change happens .. we are going to lose money on our pharmacies, and we won’t be able to afford to really run these pharmacies and our health centers,” Preas told The Bee. “This is a terrible blow to the people in the state, and especially people that are underserved.”
Federal lawsuit filed to try to stop the changes
That pending transition was described as “a move that would strike a major financial blow to FQHCs that are already reeling from the impacts of the pandemic,” according to a federal lawsuit against the California Department of Health Care Services and its director William Lightbourne.
The lawsuit was dismissed, without prejudice, in March. Anthony White, president of the Community Health Center Alliance for Patient Access — a statewide organization representing health centers — said the suit was dismissed without prejudice — meaning it can be amended and continue — because the Centers for Medicare and Medicaid Services had not yet approved the state’s transition.
“The judge said that once CMS approves (if they do), we can then resume our legal battle,” White said in an email to The Bee.
An approval from CMS is still pending, said Anthony Cava, a spokesman for the California Department of Health Care Services (DHCS).
Aside from the lawsuit, the dispute has now also resulted in legislation being introduced.
Assembly Bill 1050 aims to minimize the impact on the 340B program.
“Any cost saving measures adopted by the state must not jeopardize vital revenue sources made available by Congress expressly to help FQHCs stretch scarce federal resources as far as possible,” according to the bill’s analysis.
Dr. Paramvir Sidhu, chief clinical officer at the Family HealthCare Network, said the network has 39 clinical sites in Fresno, Tulare and Kings counties. The sites saw over 1 million patients in the last year; of those, some 88,000 were migrant and seasonal workers.
The Family HealthCare Network supports “loading off the cost of medications,” Sidhu said. Many of their patients “don’t have the finances” to afford their prescriptions otherwise.
During the pandemic, the Family HealthCare Network has been there for the most underserved, thanks to the savings from the 340B program.
“We have been at the forefront with the COVID battle,” Sidhu told The Bee. “I believe we have been able to do close to 18,000 vaccines for our patients.”
California discussing ‘options for mitigation’
The changes stem from a 2019 executive order from Gov. Gavin Newsom for California to transition all pharmacy services for Medi-Cal managed care to a fee-for-service benefit by January 2021. The purpose of the order was for the state to save money.
The January implementation was delayed due to the pandemic. Then an April 1 implementation was delayed by the state to make sure there’s no conflict with Magellan Health, the project’s contracted vendor, Cava, the DHCS’s spokesman, said.
Magellan Health was acquired by Centene Corporation, which owns and operates managed care plans and specialty pharmacies that participate in Medi-Cal, Cava said. More information on the transition is expected in May.
“The whole point of the 340B program was for places, like us, health centers to be able to afford to... put pharmacies in hard-to-reach areas that typically don’t have retail pharmacies,” Preas, with United Health Centers, said.
For Guadalupe Nagaña, 20, of Huron, and her farmworker parents, the pharmacy at the United Health Centers in her city has made a huge difference. She started going there four years ago to be able to get her prescriptions at the same place, without having to drive out of town.
Transportation was a barrier for her to pick up her medication. That’s no longer a problem for her and other Huron residents.
“There’s a lot of people that do walk to the clinic,” she told The Bee. “The majority of Huron is farmworkers.”
If those services were no longer available or were reduced, Huron would suffer, she said.
“I think it would be a big impact because our pharmacy here is, like, very used and always busy, too,” she said. “You can get your medication pretty quick.”
The transition to Medi-Cal Rx doesn’t change eligibility for or eliminate the 340B program in the state, Cava, with DHCS, said.
“However, when implemented, Medi-Cal Rx would change how providers bill and are reimbursed for 340B drugs under the Medi-Cal program,” he said.
Currently, a prescription provider within the managed care system bills a managed care plan based on an agreed-upon rate for reimbursement. Generally, Cava said, the rate is “an amount that exceeds the provider’s cost of acquiring the drug under the 340B drug pricing program.”
Under Medi-Cal Rx, those providers would, instead, bill Medi-Cal for their 340B drug acquisition costs. They would also receive a dispensing fee of either $10.05 or $13.20, Cava said, depending on the amount of their claim.
White, the president of the statewide organization representing health centers, said the dispensing fee was calculated by the state without input from health centers and is not adequate.
“The lost funding to the health centers is hundreds of millions,” he said. “At my organization (Family Health Centers of San Diego) alone, the loss will be about $12 million” annually.
Health centers would get the dispensing fee instead of the savings they currently get through the 340B program, he said. The new system, he said, would separate the pharmacy benefit from the medical benefit, with patients having two health plans.
That would further complicate the system for patients, he said.
“Secondly, the hundreds of millions now going to health centers to be reinvested in the healthcare safety net will now be going into state coffers,” White said.
Cava said state officials recognize the important role of the safety net providers.
“DHCS continues to engage with various interested parties and stakeholders representing health care facilities and groups to better understand the impact of the implementation of Medi-Cal Rx on their 340B programs and related processes, as well as to further discuss potential options for mitigation,” he said.
The efforts include ongoing consultations to develop a 340B supplemental pool of for qualified 340B clinics. A supplemental funding of $105 million annually would assist affected clinics for their lost profits under 340B, he said.
Patients ‘might wind up going without’ medications, such as insulin
United Health Centers has eight pharmacies, seven in Fresno County and one in Tulare County. The pharmacies, Preas said, are located in places such as Mendota, Huron, Orange Cove, Parlier and Earlimart.
“These are very rural, underserved communities and there is no other pharmacy in these communities,” he said. “We do have a lot of diabetic patients and they need insulin. They need their medications, and this could really impact them being able to have access to those.” (An independent pharmacy recently opened in Mendota.)
Insulin is a “life-saving” medication, especially in the Central Valley, where a large patient population is diabetic, Sidhu said.
United Health Centers provides prescriptions to patients at about a 70% discount, Preas said. Once patients are forced to travel to get their medications from pharmacies like CVS, health centers won’t have any control over the amount they will have to pay for them.
“A lot of our patients, especially our farmworker patients, they don’t have access to reliable transportation,” he said. “It’s just not accessible for them to drive even 20 or 30 minutes away to get their prescriptions, so they might wind up going without.”
Preas said he believes the move is “going to impact the Central Valley more than other parts of the state.”
State saving money at the cost of ‘taking away care’
Preas said he believes Newsom could decide not to implement the executive order, although health center leaders are “not feeling very positive” about how the situation is unfolding. California would become one of the largest buyers of medications under the changes to save money.
“But at the cost of the state saving money, it’s taking away care and taking away access to affordable and accessible medications for patients,” Preas said.
In the long-run, Preas said, there won’t be much savings for the state because people who will go without their medications will become sicker.
“They are going to wind up in the emergency room ... where the cost of care is going to be exponentially more than if they would’ve just gotten their medications when they needed them,” he said.
This story was originally published May 3, 2021 at 5:00 AM.
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