The state of Delaware decided to cut its pharmacy reimbursement rate in its Medicaid program, causing Walgreens to threaten to drop out. (The company said it would lose money on filling Medicaid prescriptions as a result of the cuts.)

In turn, one legislator threatened to drop Walgreens from the state employees health insurance plan. The trade associations for pharmacies in turn talked of a lawsuit against the state, alleging a violation of state and federal laws.

Now they’ve dropped their claims.

The good news? “The action means Delaware Medicaid patients can continue to fill prescriptions at the pharmacy of their choice.”

The state will now pay slightly more for brand-name drugs than it had planned, and slightly less for generics.

One in five state residents is on Medicaid, so the state has plenty of weight to throw around. It’s not a case of keeping private companies as much as it is sticking it to them.

When politicians use their “market” clout in purchasing medical services, they will distort the market. It will be interesting to see what happens next.

(Cross-posted from State House Call.)

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