A pair of national pharmacy groups plan to drop a suit against Delaware officials after reaching an agreement on Medicaid reimbursements to pharmacists for brand name drugs.

The National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) announced a deal with the Delaware State Department of Health and Social Services that restores much of the funding that would have been lost due to Medicaid rate cuts. The cuts were proposed in April to save an additional $1 million spent on pharmacy reimbursements and to help alleviate a state budget shortfall.

The two groups’ suit, filed in June, asked a U.S. District Court in Delaware to stop the cuts while a judge considered the merits of the suit against Delaware Gov. Jack Markell and the state’s DHSS secretary, Rita Landgraf, and her department.

The NACDS and NCPA announced that following the dismissal of the suit, the state has agreed to raise reimbursements 1.5% from the original reimbursement structure that generated the legal case. Delaware plans to reduce reimbursements for certain generic drugs, the groups said, but pharmacies will have an opportunity to petition for increased reimbursement if the new rates are below pharmacy acquisition costs.

The end of the lawsuit also paves the way for Walgreen Co. to keep its 66 Happy Harry’s company pharmacies filling Medicaid prescriptions.

In June, Deerfield, Ill.-based Walgreens said it would stop filling prescriptions, citing “new and extreme reimbursements” by the state, but hinged an agreement with state officials on the NACDS and NCPA dropping their litigation.

Rita Landgraf

Landgraf said in light of the new agreement, the state will still achieve all of the savings it targeted from the Medicaid program for fiscal 2010.

“This agreement gets the budget savings that taxpayers deserve,” Landgraf said in a statement.

She said the 160,000 Medicaid clients in Delaware will still be able to get their prescriptions filled at any of the Walgreens/Happy Harry’s stores in Delaware, as well as other pharmacies that accept Medicaid prescriptions including Rite-Aid, Acme, Pathmark, Super G and Target, as well as independently owned pharmacies.

Steven C. Anderson, president of Alexandria, Va.-based NACDS, said the agreement with Delaware officials “will result in better reimbursement for pharmacies so they can continue to serve their patients.

“Patients rely on their neighborhood pharmacies for prescription medications, counseling and other services that enable them to maintain their health and their family’s health,” Anderson said in a statement. “We appreciate the state’s cooperation in helping to preserve patient access to pharmacy services.”