Walgreen to cut Washington state Medicaid business

SEATTLE Mon Mar 30, 2009 6:31pm EDT

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SEATTLE (Reuters) - Drugstore company Walgreen Co said on Monday it would pull almost half its pharmacies in Washington state from the U.S. Medicaid program in protest against the state's plan to cut reimbursements for drugs.

Cash-strapped Washington state plans to insist on cheaper, generic drugs for low-income Medicaid clients whenever available and equivalent to brand-name drugs, and is also cutting the rate of reimbursements on all drugs to pharmacies which supply them.

Cutting the reimbursement rate of generic and brand-name drugs would severely impact the "economic viability of doing business in Washington," Walgreen said in a statement.

Walgreen, one of the largest U.S. pharmacy chains, is to withdraw 44 of its 111 pharmacies in the state of Washington from the Medicaid program. Medicaid provides health insurance to low income individuals.

Unlike Medicare, the federal health program for seniors, Medicaid is partially funded by states. In order to cut the costs of the program, Washington state announced last week it would cut Medicaid reimbursements for brand-name prescription drugs by 6 percent, effective on Wednesday.

Walgreen said it would withdraw the 44 pharmacies from Medicaid as of May 1, a month after Washington introduces its plan. It said those pharmacies represent more than 60 percent of its total Medicaid business in the state.

There is a chance other pharmacies such as CVS Caremark Corp and Rite Aid Corp will follow suit in pulling out of Washington's Medicaid program.

(Reporting by Bill Rigby; Editing by Andre Grenon, Bernard Orr)

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