For a period of time, federal and state agencies made concerted efforts to control the cost of prescription drug spending, agreeing to use a reimbursement methodology that best reflects actual drug costs. Many states, however, used different methodologies to calculate drug cost. According to the U.S. Health and Human Services (HHS), such fluctuations in methodologies actually inflate drug costs. As a result, HHS enacted rules that changed the basis of payment for Medicaid-covered drugs from an “estimated acquisition cost” (EAC) to an “actual acquisition cost” (AAC).  The states were given some discretion which benchmark to use to determine AAC. One of such benchmarks is National Average Drug Acquisition Cost (NADAC). The California Department of Healthcare Services (DHCS) conducted a study and determined that NADAC adequately reflects actual drug cost acquisition in the state. It promptly notified CMS of the intent to switch to NADAC in reimbursing the pharmacies and obtained CMS approval.

The DHCS, however, did not immediately implement the changes approved by CMS. Instead, it continued to pay pharmacies through the Medi-Cal claims processing system consistent with the rate methodology used prior to the use of AAC. This lead to overpayments to pharmacies. Currently, the DHCS is recouping the overpayments resulted from the state’s delay in switching to NADAC.

As a result, California pharmacies are facing large monetary recoupments (particularly for specialty medications). Many NADAC prices do not even cover acquisition cost.

And in May 2019, California pharmacies filed a law suit against DHCS and HHS alleging irreparable harm to pharmacies and “a looming public health crisis.” Pharmacies complain that  large numbers of Medi-Cal patients will be denied access to critical life-saving specialty drugs. A motion for preliminary injunction is currently scheduled to be heard on August 30th, 2019.

For more information, visit California Pharmacists Association webpage (where you can also support the action financially).