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Health news won’t make it easy to unwind California’s Medicaid contracts with Walgreens.

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Samantha Young, Kaiser Health News

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SACRAMENTO, Calif. — Gov. Gavin Newsom declared last month California was done doing business with Walgreens. The pharmacy chain had said it would not distribute an abortive pill in 21 states where Republicans threatened legal actions. Kaiser Health News learned that Newsom’s hardline tweet must be retracted by the Democratic governor.

Health law experts stated that California is legally bound by the state’s massive Medicaid program to continue doing business alongside Walgreens. According to a public records request Walgreens was paid $1.5 billion last fiscal year.

Related: How Walgreens’ decision not to allow abortion pills could impact its growth strategy

Newsom’s administration said it will “continue comply” with federal law by paying Walgreens via Medi-Cal. This program provides health coverage for roughly 15 million people with low incomes or disabilities. Legal scholars warned that if California were to stop covering Medi-Cal prescriptions made at Walgreens, it would be in violation of federal law. Federal law allows patients to obtain their medications at any pharmacy approved by the government.

Tony Cava, spokesperson for California Department of Health Care Services, stated that California has no plans to take any action that would violate federal Medicaid regulations or that could hamper access for low-income people.

Anthony York, Newsom spokesperson, stated that “Tweeting does not constitute policy.” He also said that Newsom had pulled back last month on renewing a contract for specialty drugs. York claimed that Walgreens was re-invited to apply to the contract. Under the contract, Walgreens has received $54 million from Newsom.

Newsom’s ability to make big announcements on social media is evident in the case with the Illinois-based pharmacy chain. However, he offers little detail and lacks follow-through. Newsom’s national profile has been raised, and there is speculation that he will run for the presidency. He has also traveled to red states and launched a new political action group.

David McCuan is the political science department chair at Sonoma State University. “It’s more about appearances, style and approach than about substance,” McCuan said. Newsom and his administration “oversell the promises they make and don’t deliver.”

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The governor tweeted on March 6 that California would not do business with @walgreens after the second-largest U.S. drugstore chain stated it would not dispense mifepristone in states that make it illegal or where it could face lawsuits.

Steve Maviglio, a Democratic strategist, stated that Newsom’s support for abortion rights does not mean that Walgreens must be paid through Medi-Cal.

Maviglio stated that he would be the headline for his efforts to protect abortion rights. This can be attributed to technical difficulties. He will be rewarded for standing up against a corporation.

Federal law is intended to give Medicaid patients choices about where they receive their health care, including prescriptions. Medicaid statute protects Walgreens as an approved provider. It states that no health plan or entity may “restrict the choice” of the individual who receives services. Legal and Medicaid experts agree that it is extremely difficult for the Newsom administration disqualify Walgreens.

“As long Walgreens is performing as it should for Medicaid beneficiaries, dispensing all drugs in a way that is consistent with permitted pharmacy practice, then there is no reason to exclude them,” Sara Rosenbaum, a professor at George Washington University of health policy and law, said.

Walgreens is protected by federal regulations. These same regulations have allowed Planned Parenthood access to health care services for Medicaid enrollees in conservative state, where leaders have failed to exempt the network of clinics.

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A pharmacy company that is approved can be excluded from state networks if it has committed fraud, or other contract violations. Edwin Park, a Georgetown University research professor with expertise in Medicaid law, said that only.

Park stated, “Certainly that wouldn’t be Walgreens.”

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

Schnur stated that the original announcement sounded like a significant step for California to adopt principle, even at great financial cost. “They’ve quietly backed off.”

KHN obtained records that showed the state paid Walgreens $1.5 million last year to purchase and dispense prescriptions for Medi-Cal enrollees. Walgreens was reimbursed for the prescriptions it issued with $1.4 billion of the payment. The $123 million remaining went to dispensing fees. This is a payment made to pharmacists for each prescription that they fill. The federal government covers at most half of the state’s payments. Rebates from drug manufacturers also offset these payments.

A Walgreens spokesperson declined comment on the company’s business with California. He referred to the March statement that it made: “Providing legally approved medication to patients is what pharmacies do. It is rooted in the community commitment in which we operate.”

Walgreens stated that it will dispense mifepristone in “any jurisdiction where it’s legally permissible” following a January FDA rule that allowed certified pharmacies to give the abortion pill. This is the most common method of terminating pregnancies. Walgreens doesn’t plan to limit the sale of abortion pills in California or other states that allow pharmacies to dispense it.

Democrats have called on pharmacy chains to sell the abortion pill, even as GOP attorneys general threaten legal action. Walmart, Costco and Albertsons have all resisted the call, as has Health Mart and Health Mart. CVS and Rite Aid have not indicated that they intend to start certification to dispense the pills.

Newsom would have reacted against one of his signature health initiatives if he had been able to end Medi-Cal’s relationship to Walgreens. Newsom proposed that the state take over prescription drug coverage for MediCal patients in 2019, a proposal that he made after he was elected to office. Many Medi-Cal patients had been covered by managed-care plans.

Part of Newsom’s pitch: Patients could visit nearly any pharmacy in California.

Kaiser Health News is a national news service on health policy. It is an independent editorial program of the Henry J. Kaiser Family Foundation, and is not affiliated to Kaiser Permanente.

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