The Schwarzenegger Administration, in an eleventh hour move, took action to delay a hearing on a temporary restraining order (TRO) sought by eight retail community pharmacies to stop the ten percent Medi-Cal provider cuts from taking effect on July 1, 2008. On June 9, 2008, eight California pharmacies filed an action in state court seeking to restrain DHCS from implementing a ten percent reduction in pharmacy reimbursements for prescriptions dispensed to Medi-Cal beneficiaries. Pharmacies demonstrated in their complaint that the effect of these cuts going into effect on July 1 would be catastrophic to the state's Medi-Cal program and the over 6,500,000 California residents who rely on Medi-Cal for life saving prescriptions.

The Department of Health Care Services (DHCS) and its Director Sandra Shewry petitioned to have the lawsuit moved to federal court following the release of a tentative ruling by the judge in the state court that reflected his willingness to hear the arguments on both sides in the case. The pharmacies claim that the State's move is unwarranted because the lawsuit focuses entirely on DHCS's compliance with California law.

The law in question requires DHCS to "promptly seek any necessary federal approvals for implementation of [the 10% cut]," which in turn requires California to file with the federal Centers for Medicare and Medicaid Services (CMS) a State Plan Amendment to implement the 10% cuts or take other action. DHCS makes no claim that such approval has been sought. The State Plan is a comprehensive written statement prepared by DHCS, which both describes the nature and scope of the Medi-Cal program and gives assurances that DHCS will administer the plan properly.

"We are sorely disappointed with what appears purely to be a delay tactic by the State and believe DHCS had no basis for the removal," said Lynn Rolston, chief executive officer of the California Pharmacists Association. "It seems the State is afraid to have these issues heard by California courts. We believe the pharmacies that filed this action will seek an immediate remand to state court for a hearing on the merits. There are two other lawsuits pending in federal court as a result of similar action by DHCS. We are confident that all of these cases present strong legal arguments for stopping these draconian ten percent provider cuts."

Attorneys for the pharmacy plaintiffs have prepared a motion to remand the action back to the state court and hope to have their motion for a TRO heard next week. Despite these efforts, Rolston fears that the cuts may be implemented on July 1. "This could result in tragic consequences for pharmacy and the patients they serve," she said.

A recent report showed that if the ten percent Medi-Cal provider cuts are implemented, pharmacies will be faced with tough decisions including turn away new Medi-Cal beneficiaries, stop accepting Medi-Cal altogether or going out of business. Independent and rural pharmacies will be hardest hit, forcing chain pharmacies to pick up a larger portion of the Medi-Cal population. As part of the domino effect, chain pharmacies will feel the strain and might cope with reduced revenue in other ways, such as cutting staff and hours, which would mean longer lines and slower service for everyone.

The eight pharmacies involved in the lawsuit are Farmacia Remedios, Inc., Ross Valley Pharmacy, South Sacramento Pharmacy, Horton and Converse Pharmacies, Zweber Apothecary, Komoto Pharmacy and Medical Pharmacy, Pucci's Leader Pharmacy and Gregg's Pharmacy vowed to continue the fight to seek a permanent injunction against the ten percent Medi-Cal provider cuts.

California Pharmacists Association
www.cpha