Governor Newsom wanted California to cut ties with Walgreens. Then Federal law got in the way.

SACRAMENTO, Calif. — Gov. Gavin Newsom announced last month that California has Doing business with Walgreens is “over.” After the drugstore chain announced it would not distribute the abortion pill in 21 states, Republicans threatened legal action. KHN has since learned that the Democratic governor had to compromise his hard-line tweets.

California is legally bound to continue doing business with Walgreens through the state’s massive Medicaid program, health law experts say. And the state paid Walgreens $1.5 billion last year, according to a public records request.

The Newsom administration confirmed it will “continue to comply” with federal law in paying Walgreens through Medi-Cal, which provides health coverage to about 15 million low-income and disability residents. If California stops Medi-Cal prescriptions filled at Walgreens stores, lawyers have warned, the state would violate a federal law that allows patients to get their drugs from any approved pharmacy.

“California does not intend to take any action that would violate federal Medicaid requirements or impair access for low-income individuals,” said Tony Cava, a spokesman for the California Department of Health Services.

Newsom spokesman Anthony York said, “Twitter is not politics.” He added that the governor “will not take any action that will harm people who need access to care.” Walgreens has even been invited back to apply for a specialty drug contract that Newsom withdrew from renewing last month, York said. According to the contract, Walgreens received about 54 million dollars from the state.

The dust-up over the Illinois-based drugstore chain illustrates Newsom’s penchant for sweeping social media announcements, where he garners national headlines but offers few specifics and few follow-throughs, political strategists said. Newsom has boosted his national profile and speculation about a presidential bid by traveling to red states and launching a new political action committee.

“It’s a lot more about appearance, style and approach than content,” said David McCwan, chair of the political science department at Sonoma State University. Newsom and his administration are “overselling their pitches and not really delivering.”

On March 6, the governor tweeted: “California will not do business with @walgreens or any company that kowtows to extremism and puts women’s lives at risk,” after a second US pharmacy chain announced it would not stock mifepristone. states where it is illegal to distribute the pill, or where the company faced potential lawsuits if it did so.

Democratic strategist Steve Mavilio said continuing to pay Walgreens through Medi-Cal does not take away Newsom’s support for abortion rights.

“He’s going to get an abortion rights headline, and he can chalk it up to a technical difficulty,” Mavilio said. “He will be rewarded for standing up to the corporation.”

Federal law is designed to provide Medicaid patients with choice about where they receive health care, including prescriptions. Approved providers like Walgreens are protected by the Medicaid law, which states that no health plan or organization may “limit the choice of a qualified person from whom an individual may receive services.” Legal and Medicaid experts say that makes it extremely difficult for the Newsom administration to disqualify Walgreens.

“As long as Walgreens is doing the right thing for Medicaid beneficiaries, providing all legal drugs to the authorized practice of pharmacy, then I see no reason to exclude them,” said Sarah Rosenbaum, a professor of public health. law and politics at George Washington University.

The federal regulations protecting Walgreens are the same ones that allowed Planned Parenthood to offer health care to Medicaid enrollees in conservative states where leaders tried unsuccessfully to exclude the clinic chain from receiving taxpayer funding.

An established pharmacy company can be excluded from state networks only if it has committed fraud or other contractual violations, added Edwin Park, a Georgetown University research professor of Medicaid law.

“Of course that won’t be the case with Walgreens,” Park said.

It’s unclear whether Newsom was aware of how difficult it would be for California to end its Medi-Cal provider contract with Walgreens, said Danielle Schnur, a Republican-turned-independent strategist who also teaches political science at the University of Southern California. :

“The original announcement sounded like a principled move for the state of California, even at great financial cost,” Schnur said. “They quietly went back.”

Through a records request, KHN learned the state paid Walgreens $1.5 billion last year to buy and dispense prescriptions to Medi-Cal enrollees. Most of the settlement, $1.4 billion, reimbursed Walgreens for the prescriptions it dispensed. And the remaining $123 million went to the payment of pharmacies, for each prescription paid to pharmacists. The federal government covers at least half of the state’s payments, which are also offset by drug manufacturers’ rebates.

A Walgreens spokeswoman declined to comment on its business with California, referring to the same statement issued in March.

Walgreens said it plans to distribute mifepristone “in any jurisdiction where it is legally permitted.” The company was responding to an FDA rule finalized in January that allows certified pharmacies to dispense the abortion pill, the most common way people end a pregnancy. Walgreens is not proposing to restrict sales of the abortion pill in California or other states where abortion is legal and pharmacies are allowed to provide it.

Democrats have urged drugstore chains to sell the abortion pill, even as GOP attorneys general threaten lawsuits. But many, including Walmart, Costco, Albertsons and Health Mart, have not joined the fray. Only Rite Aid and CVS have said they plan to begin certification to dispense the pills.

If Newsom were to sever Medi-Cal’s relationship with Walgreens, he would be reversing one of his signature health care initiatives. When he took office in 2019, Newsom proposed that the state take away prescription drug coverage for Medi-Cal patients, many of whom were covered through managed care plans.

Part of Newsom’s speech. patients can go to almost any pharmacy in California.

This story was prepared by KHN, which publishes California Healthline, an independent editorial service of the California Health Foundation.

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