New York health system sues state over 340B changeup that could jeopardize behavioral health funding

New York healthcare providers, including Buffalo, N.Y.-based Evergreen Health, are suing the state over changes to its 340B program set to take effect April 1, ABC affiliate WKBW reported March 27.

"The lawsuit honestly is the last stop for us," Evergreen COO Michael Lee told WKBW. "What we've built our whole model on is using that program."

Under the current system, 340B allows providers serving high populations of low-income patients on Medicaid to buy discounted prescription drugs that are then reimbursed at full price. Providers use what's left over to invest in and pay for services including behavioral health, food pantry services, housing, transportation and dental care.

After April 1, the state will keep the majority of the savings, with providers seeing only a small portion in the form of a pharmacy dispensing fee. However, after the transition the state will reinvest $700 million to fund care for vulnerable populations, the report said.

"[The new 340B system] will create transparency in reimbursements to pharmacies, eliminate profiteering among health care intermediaries, leverage the state’s purchasing power to negotiate with drug manufacturers, streamline practitioner administration, and reduce confusion," according to Gov. Kathy Hochul's budget.

Evergreen Health could see $14 million in annual losses to its $117 million budget due to the changes, the report said. It had used those funds to subsidize expanded services for patients with chronic conditions, as well as the cost of health clinics for people with disabilities.

"We would have to eliminate those programs that we've taken decades to create, and we would have to lay off employees," Evergreen Health CEO Raymond Ganoe said. "Patients would suffer and lives could be lost. It's a huge deal."

The change is expected to usher in a $250 million funding loss statewide, and hospitals across New York are predicting losses of $240 million. 

Buffalo-based Neighborhood Health Center, a federally qualified health center, projects a $3.6 million loss — nearly 10 percent of its $40 million budget, the report said. Programs expected to take a hit include the behavioral health department, substance use disorder program, counseling for pregnant patients and the agency's dental program, which are all funded by excess 340B funds.

New York has said it is working on a way to compensate providers for the lost savings, but the state hasn't yet disclosed how that will happen, the report said.

"California has done this and we've watched closely," Neighborhood Health Center CEO Joanne Haefner said, according to the report. "Theirs went into effect a year and a half ago, and not one health center has been reimbursed any money yet."

Critics of the 340B program say commercial pharmacies and pharmacy benefits management companies who contract with smaller providers are also pocketing excess revenue from the program's savings, the report said. The big pharma lobby has also opposed the program, which reduces major pharmaceutical companies' profits.

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