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Judge allows state to cut Medicaid fees to pharmacists

September 15, 2011

An Indianapolis federal judge has reversed the temporary restraining order she issued two months ago that stopped the state from cutting fees it pays to pharmacists for dispensing Medicaid prescriptions.

The decision Wednesday by U.S. Judge Tanya Walton Pratt in the Southern District of Indiana follows more comprehensive briefing and arguments held in August. She overruled the judgment issued a week after the lawsuit was filed July 1.

As plaintiffs, the non-profit Community Pharmacies of Indiana and Williams Brothers Health Care Pharmacy in southern Indiana challenged a new state policy requiring a 38 percent cut in the Medicaid pharmacy-dispensing fee; meaning pharmacies would receive $3 instead of $4.90 for preparing and dispensing any particular drug under the Medicaid program.

Judge Pratt granted a temporary restraining order against the Indiana Family and Social Services Administration and its Office of Medicaid Policy and Planning on July 8 until the briefs and court arguments could provide more of the legal theory behind the case.

In her 24-page order Wednesday, Judge Pratt noted that the plaintiffs’ overarching argument has remained the same: that the fee reduction is a violation of state and federal law and would cause irreparable harm, because many pharmacies will have to seriously reevaluate whether they can afford to continue offering Medicaid services as they had and some would be driven out of business.

“The State counters that these apocalyptic scenarios are purely speculative, and, in any event, the Fee Reduction complies with state and federal law,” she wrote. “While the Court certainly sympathizes with Plaintiffs, the State’s position best aligns with the law at this stage of the proceedings.”

Judge Pratt noted that it’s “not to say the Plaintiffs are crying wolf,” and indeed “their dire predictions may, but hopefully will not, morph into reality. Regardless, at this stage, the Court simply has more questions than answers when it comes to the Fee Reduction’s further impact on the availability of Medicaid services.”

Judge Pratt reversed the TRO and denied the request for a preliminary injunction. No further hearings have been scheduled as of the date of the order, according to the federal court’s docket. The case is Community Pharmacies of Indiana, et al v. Indiana Family and Social Services Administration, et. al., No. 1:11-cv-00893.

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