ALBANY, N.Y. (CN) - Independent pharmacies sued New York State to stop the state from steering Medicaid recipients to mail-order delivery of certain drugs, which the state Pharmacists Society claims violates patients' rights and threatens neighborhood drugstores.
The class action in Albany County Supreme Court claims the state Department of Health compiled a list of expensive specialty drugs that Medicaid managed-care providers likely would want filled by a limited network of pharmacies, most likely mail-order ones.
The plaintiffs, the Pharmacists Society of New York, five drugstores and two Medicaid patients claim the list was compiled after "secret meetings" the state held with managed-care plans, pharmacy benefit managers and large mail-order pharmacies.
"[T]hese ill-advised changes have already begun to endanger the health and lives of many of New York's most vulnerable citizens and in many cases effectively severed the longstanding professional relationships that existed between pharmacists, prescribers and their patients/customers," according to the complaint.
"They further threaten the continued viability of community pharmacy providers currently serving the Medicaid population."
Named as defendants are the State of New York, its Department of Health, Health Commissioner Nirav Shah, and Janet Zachary-Elkind, a deputy director in the department's Office of Health Insurance Programs.
The plaintiffs ask the court to enjoin the state from going forward with the plan, which they call "illegal, irrational, arbitrary and capricious."
Medicaid is the joint federal-state program that pays for medical services for the poor and disabled, "70 percent of whom are minorities [and] suffer disproportionately from socioeconomic challenges such as cultural, literacy and language barriers, transience and limited transportation resources," according to the lawsuit.
In 1997, New York began to shift medical care for Medicaid recipients from a fee-for-service model to a managed-care one. Under the former, recipients chose a doctor from among those enrolled in New York's Medicaid provider network; with the latter, they choose a doctor from a list of providers in a managed-care network, generally a health maintenance organization, or HMO.
The shift was designed to expand health coverage to more low-income New Yorkers, using savings generated through managed care, which reimburses providers on a per-patient basis rather than varying by complexity of the service.
Prescription drugs continued to be provided under the fee-for-service model until October 2011, when they were "carved in" to the managed-care model, the lawsuit states. As with doctors under managed care, Medicaid recipients would choose from pharmacies in the network when filling prescriptions.
Federal law provides a "freedom of choice requirement" for Medicaid recipients, meaning the list of doctors or pharmacies offering services must be robust. To underscore its commitment to that standard, New York's Legislature amended state insurance law in late 2011 "to prohibit insureds from being mandated to use a mail-order pharmacy," according to the lawsuit.
Known as AMMO, for anti-mandatory mail order, the amendment required that "any pharmacy" - mail order or bricks-and-mortar retail - could be used by patients "as long as the pharmacy offers the same pricing and terms."
"The AMMO bill thus leveled the pharmacy playing field by requiring health insurers to provide patients with equal access to retail Medicaid pharmacy providers as long as equivalent pricing and terms are offered," the complaint states.
However, in March this year, the Legislature, while reaffirming patient choice, amended state social services law "creating an exception allowing managed-care Medicaid providers to 'limit' their networks of pharmacies for so-called specialty drugs" based on "clinical, professional or cost criteria," according to the complaint.
Pharmacists assumed these drugs "would apply to rare drug classes of limited distribution or those not traditionally available at the retail level, and recognized to be not generally available via community pharmacies," the plaintiffs say.
But through several drafts of qualifying criteria, groups such as the New York State Board of Pharmacy (the licensing body for pharmacies in the state), the Chain Pharmacy Association and the plaintiff Pharmacists Society (the trade group for pharmacists) expressed concern to the Department of Health that the list of eligible drugs was too broad.
In the end, the list included nearly 350 drugs that are used to treat complex, chronic or rare conditions; that require special handling or storage; that warrant monitoring or administration by a health care professional; and that cost at least $1,500 a month.
The plaintiffs claim the list was developed by the Department of Health "through secret meetings with large PBMs" - pharmacy-benefit managers that oversee the managed-care plans' pharmacy services - "that have a vested interest in capturing the largest possible share of the Medicaid drug market for their related mail-order businesses.
"Forcing patients into mandatory mail order has been an open secret among these plans and PBMs even before the specialty drugs program was promulgated," the complaint claims.
The final drug list was issued Sept. 7 with an effective date of Oct. 8.
"The list is extremely broad, containing many common medications that have been filled reliably by community pharmacies for decades for such widespread diseases as multiple sclerosis, rheumatoid arthritis, cancer and hepatitis C, among others, and represents a dramatic incursion into the drug formularies traditionally served by retail pharmacies representing a significant portion of the $5 billion Medicaid drug program serviced by the 4,000-plus pharmacies currently in the Medicaid program," the pharmacies say.
The lawsuit expresses concern about the list's impact on patients' health.
"In a mail-order scenario, patients - many of whom are high risk - are required to use designated mail-order providers in a setting in which there is no face-to-face contact with the dispensing pharmacy, or its staff; no routine counseling provided or required; and without the benefit of interpersonal contact that can be critical to a patient's understanding of drug regimens, interactions, side effects and other related factors," the complaint states.
And, it contends, "In addition to harming patients in the short run, the specialty drug program coupled with mandatory mail order will drive many independent pharmacies out of business, resulting in a significant increase in the concentration of market power among the mostly out-of-state mail-order pharmacies associated with PBMs.
"The new marketplace for pharmacy services, denuded of many community pharmacies that have loyally served patients locally for decades, will restrict patient choice and access even further."
The plaintiffs ask the court to find the defendants in violation of the federal freedom-of-choice requirement, state and federal antitrust laws, state insurance law's AMMO provisions, and New York drug utilization record requirements, which mandate that patient prescriptions be monitored to avoid harmful interaction.
Linda Clark of Hiscock & Barclay in Albany represents the plaintiffs.
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