California Governor Gavin Newsom on Wednesday withdrew a $54m contract with Walgreens after the pharmacy giant indicated it would not sell an abortion pill by mail in some conservative-led states.

Newsom ordered state officials to not renew a contract with Walgreens to purchase specialty pharmacy prescription drugs for California’s prison healthcare system, including antiviral and antifungal drugs and medication used for congestive heart failure. Walgreens has received about $54m from the contract, which expires 30 April.

Newsom’s office said the state will buy the drugs elsewhere.

“California will not stand by as corporations cave to extremists and cut off critical access to reproductive care and freedom,” Newsom said in a news release. “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.”

A representative from Walgreens, based in the northern Chicago suburb of Deerfield, Illinois, did not respond to an email from the Associated Press seeking comment. But earlier this week, the company said in a statement it plans to dispense the drug, called mifepristone, “in any jurisdiction where it is legally permissible to do so”.

“Providing legally approved medications to patients is what pharmacies do, and is rooted in our commitment to the communities in which we operate,” according to a statement posted onto the company’s website.

Mifepristone is a medication that when combined with another drug will end a pregnancy. The US Food and Drug Administration approved it in 2000 for use up to the 10th week of pregnancy. Today, more than half of all abortions in the US are drug-induced, according to the Guttmacher Institute, a research group that supports abortion rights.

After the US supreme court last year overturned the federal right to an abortion, more than a dozen states restricted the use of abortion pills. But those restrictions are being challenged in court.

Attorneys general in 20 states, mostly with Republican governors, have warned Walgreens and CVS that the companies could face legal consequences if they sell abortion pills in their states. Last week, Walgreens confirmed it sent a response to each attorney general saying it would not dispense the drug in their states.

Newsom responded to that news on Monday, posting in a message on Twitter that California will not be doing business with Walgreens “or any company that cowers to the extremists and puts women’s lives at risk”.

“We’re done,” Newsom said.

Losing the California contract will have a small impact on Walgreens’ revenues, as the company reported $132.7bn in sales for the fiscal year that ended 31 August.

But for Newsom, the move is more about solidifying California’s role as a leader in what he has called “reproductive freedom”.

Newsom has vowed to make California a sanctuary for people in other states where abortion is illegal or severely restricted. Last year, the California governor signed more than a dozen new laws aiming to protect abortion rights, including signing off on $20m in new spending to help pay for the transportation and lodging expenses for people traveling to California from other states to get an abortion.