December 22, 2011

BPW defers award of disputed $120M prison pharmacy contract

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By Megan Poinski
Megan@MarylandReporter.com

After hearing passionate arguments from companies and state officials, the Board of Public Works decided to wait for a ruling from the Board of Contract Appeals before approving a disputed $120 million five-year contract to provide pharmacy services to prison inmates.

Officials at the Department of Public Safety and Correctional Services and the Department of Budget and Management told board members on Wednesday that they strongly endorsed Pennsylvania-based Diamond Pharmacy Services to get the contract, replacing current provider Correct Rx Pharmacy Services.

Board of Public Works: Treasurer Nancy Kopp, Gov. Martin O'Malley, Comptroller Peter Franchot

Board of Public Works: Treasurer Nancy Kopp, Gov. Martin O'Malley, Comptroller Peter Franchot

However, Linthicum-based Correct Rx formally protested the recommendation, charging that the way the companies had been evaluated was incorrect. And Omnicare, a company firmly established in Maryland, also filed a protest because its officials felt that it wasn’t considered in light of its unique operations. Both cases have yet to be heard by the Board of Contract Appeals.

State could save $24M over 5 years

Budget and Management Secretary T. Eloise Foster recommended that the board go ahead and approve the five-year contract now. She said the new contract would bring the state a savings of $24 million over five years, the old contract expires on Jan. 1, and officials who vetted the contract proposals were confident in Diamond Pharmacy Services.

Two of the three Board of Public Works members — Comptroller Peter Franchot and Treasurer Nancy Kopp — thought that approving a disputed contract would be unfair.

“It is the constitutionally and legally prescribed right of any vendor to use the system to confirm the integrity of the bid process,” Franchot said. “If we are going to continue to short-circuit the system because it is too time consuming or inconvenient, or the litigants’ point lacks merit, why allow bid protests?”

The board members, chaired by Gov. Martin O’Malley, did not vote the contract down on Wednesday. Instead, they withdrew the item from their agenda and did not take a vote. They also withdrew an item that would extend Correct Rx’s contract for up to six months to provide a smooth transition to the new provider.

At the board’s next meeting on Jan. 4, members will vote for a six-month extension of Correct Rx’s current contract, making it retroactive to Jan. 1.

“This seems like a satisficing solution for a messed up process,” O’Malley said.

Why Diamond got the recommendation

The team of professionals who evaluated the proposals used a detailed methodology carefully weighing different scores. Foster said that technical aptitude – the services the contractor would have – was worth 50%. The other half of the evaluation was based on cost.

Overall, Foster said, Diamond got the top recommendation for its good value. It ranked second out of all of the contractors on technical aspects, and had one of the lower costs. By going with Diamond, Foster said, the state would save $5 million each year.

“I am confident it will stand up to scrutiny,” Foster said.

Diamond has not worked as a pharmacy contractor in Maryland, but company Chief Operating Officer Mark Zilner said that it is the nation’s largest provider of prison pharmaceutical services. One in five prisoners in the United States receives medicine from Diamond, he said.

Zilner said that Diamond was ready to start serving Maryland’s inmates next weekend, just in case the board had voted on Wednesday to give them the contract.

Current company had high technical scores

Correct Rx President and CEO Ellen Yankellow told the board she did not understand how her company did not get the top ranking. Correct Rx had the highest score on its technical merits, and Yankellow was not sure how another company had been able to bid $24 million less than them.

Yankellow said that the emphasis in the contract process should not have been on prices, since the need for drugs varies from year to year. Instead, she said, the technical merits are much more important.

“This needs to go back and have someone who’s objective walk back through the data,” she said.

Yankellow said that the $24 million in savings from Diamond might just be the way that the company is presenting its figures, and not represent actual money the state can save.

Currently, 43% of Correct Rx’s business is with Maryland prisons, and not getting the contract would mean that 43 of the 98 Maryland-based employees would have to be laid off.

Kopp said that she was troubled by the size of the savings and the fact that she did not have the knowledge to be able to resolve the dispute. The Board of Contract Appeals is the only body that can, she said, and they are needed in this situation. The savings of signing the contract with Diamond would be realized immediately, but Kopp said the issue goes deeper than finances.

“I don’t like to put $4 or $5 million in savings at risk more than anybody else, but after listening to all of this, I am more troubled,” Kopp said. “Enough that I just think that the award in the face of this protest from several firms is something I can’t support.”

Adding to all of the confusion, Yankellow said, was the letter she received last year telling her that Correct Rx had been recommended to receive the renewed contract.

Foster said the company did not actually get the recommendation at that point because the Department of Budget and Management found several inconsistencies and problems in its documents. Budget and Management threw out all of the bids, partnered with the Department of Public Safety and Correctional Services, and started a new solicitation process.