California’s budget for the fiscal year that starts July 1 rejected Gov. Jerry Brown’s (D) proposal to exclude Medicaid beneficiaries from a federal program offering discounted drugs to safety-net hospitals and clinics.

Lawmakers approved the overall spending plan June 14 but rejected Brown’s request to prohibit safety-net providers from dispensing prescription drugs they purchase at a discount through the federal 340B drug pricing program to Medicaid enrollees. A companion bill that is eligible for a vote the week of June...