Gov. Newsom Forced to Reverse His Walgreens Ban; Violates Federal Law

Statements from the Governor’s office and the California Department of Health Care Services confirmed on Thursday that Governor Gavin Newsom’s policies to “no longer do business with Walgreens”  have been reversed because of the federal Medicaid statue prohibiting him from doing so.

Following Walgreens’ announcement in early March to that they would longer sell abortion pills in the 20 states where they are illegal at the state level, Governor Newsom fired back by tweeting out “California won’t be doing business with Walgreens or any company that cowers to the extremists and puts women’s lives at risk. We’re done.”

California won't be doing business with @walgreens — or any company that cowers to the extremists and puts women's lives at risk.

We're done.https://t.co/OB10cYfm8H

— Gavin Newsom (@GavinNewsom) March 6, 2023

On March 9th, Newsom announced that the contract between the California Department of General Services (DGS) and Walgreens to procure specialty pharmacy prescription drugs, primarily used by the California Department of Corrections and Rehabilitation (CDCR) and its correctional health care system, would not be renewed. The DGS specifically notified Walgreens that a planned renewal on May 1, 2023 would no longer be tenable, with the state looking to others to fulfill the contract instead. In total, Walgreens is set to lose $54 million annually from that one contract alone.

“California will not stand by as corporations cave to extremists and cut off critical access to reproductive care and freedom,” said the Governor in a statement. “California is on track to be the fourth largest economy in the world and we will leverage our market power to defend the right to choose.”

In addition, Newsom further hinted at more cuts with Walgreens in the near future.

However, nothing more came to pass as federal law overrides Newsom’s decision. The governor’s plan specifically ran into Medicaid Statutes which says Medicaid patients get to choose where they get health care and prescriptions, with no health plan or entity, such as Governor Newsom, allowed to restrict them in any way. Only fraud or contract violations could legally exclude a pharmacy or health care company from state health contracts, which Walgreens was clear of doing.

State agencies also revealed that in 2022, Walgreens was paid by the state of California $1.5 billion to handle prescriptions for those under Medi-Cal, with the federal Medicaid program covering about half of state, further discrediting Newsom’s attempt to lock out Walgreens. Facing a potentially large legal situation, as well as possibly disrupting care to millions of Californians as a result, the Governor’s office and other state agencies confirmed on Thursday that no more action against Walgreens would happen.

Reversal of policy

“California has no intention of taking any action that would violate federal Medicaid requirements, or that could undermine access for low-income individuals,” said California Department of Health Care Services spokesman Tony Cava on Thursday.

Anthony York, a spokesman for Governor Newsom, also added, “Tweeting is not policy. The Governor will not take any action that hurts people who need access to care.”

As for the lost $54 million contract, the only part of the policy reversal that couldn’t be undone, York said that Walgreens would be re-invited once again to apply for the contract.

Political observers said Friday that Newsom was likely hoping to keep the policy reversal quiet given that the Governor made such a huge deal about standing up to Walgreens, only to be told that federal law would not allow him to do so.

“Newsom lost, and he really didn’t want anybody to know it,” Tina Sibley, a Phoenix-based health care policy consultant, told the Globe on Friday. “It’s embarrassing. He made such a huge public announcement over this and started to follow through on it. But he and his people didn’t do all of their homework on this. I mean, checking to make sure that something you do isn’t going to be stopped by federal law should have been a big checkbox  for them, but they didn’t do that.”

“Newsom was mad, made a quick decision to punish the company because he didn’t like what they did, started to punish them, found out that he couldn’t, then had to reel back with the tail between his legs and hoped not many people would ask about it. He is still pro-abortion rights and policy, but, as he learned, you can’t break federal law to do it or just try to make it policy just because you don’t like it.”

As of Friday afternoon, Newsom has yet to personally say anything about the Walgreens policy reversal, or on any possible alternate plans regarding the company with state contracts.