Express Scripts gets $2.4 billion contract for employees’ prescriptions

By Megan Poinski
Megan@MarylandReporter.com

A complex and contentious $2.4 billion contract for state employees’ prescription drugs was awarded to St. Louis-based Express Scripts on Wednesday, over the protests of Comptroller Peter Franchot and the Maryland company holding the old contract.

The five-year contract, approved by the Board of Public Works with the votes of Treasurer Nancy Kopp and Gov. Martin O’Malley, changes the company that provides prescription drugs to about 219,000 state government workers and retirees.

Budget and Management Secretary T. Eloise Foster said that over the life of the contract, it should save the state $100 million.

By Kevin Kratka, Kratka Photography

The company that has the contract now, Rockville-based Catalyst Rx, also fought for the contract.

When Catalyst was not recommended for the contract last March, it appealed the decision to the Board of Contract Appeals. The appeals board made its final decision last month, and forwarded its recommendation to the Board of Public Works to award the contract.

“I’m rarely involved in a contract that is pored over more than this one,” O’Malley said, before moving to award the contract to Express Scripts.

Franchot doubts cost savings

Franchot had some doubts that giving the contract to Express Scripts would be the best decision. He said he had no problems with Express Scripts or the amount of time it took to make a recommendation on such a complex contract, but he wasn’t sure that the promised cost savings would be realized.

He also questioned whether the comparisons done by the state’s team of evaluators had been done fairly. The fact that a Maryland-based company was losing the contract also upset him.

“Maryland companies do a tremendous job for us, then they bid for our business and feel that the balls and strikes are being changed,” Franchot said.

The contract was initially set to be considered at the Board of Public Works meeting two weeks ago. Franchot requested to put it off so he could have the time to review the Board of Contract Appeals’ report.

Foster told board members that when the request for proposals was put out, bidders were told that their cost and their technical skills would be considered equally. Franchot pointed out that Catalyst Rx scored higher on the technical side, and it seemed that they could also save the state more money. Reading from the ruling on the case from the Board of Contract Appeals, Franchot said that he and the appeals board had a hard time figuring out exactly where the cost savings were.

Anne Timmons, director of the Employee Benefits Division in the Department of Budget and Management, said that the team that evaluated the bids broke down the figures and put together a detailed matrix to compare everything.

Michael Madalena, a senior consultant with Gabriel, Roeder, Smith and Company, which worked on the selection process, said that the state actually adjusted the numbers to match the pool of state employees, meaning that discounts and actual usage were reflected.

“What you are looking at are national unadjusted numbers,” Madalena said. “For these numbers, they did not look at the mix of drugs, the community that they are serving, and that kind of thing.”

Franchot said that there were also some issues with where and how profit margins were included in the evaluation. It does not seem like they were comparing apples to apples, he said.

“I’m all for the state saving money,” Franchot said. “But there’s a possibility here, a very strong one, that the state would not be saving money.”

Walgreens out of contract

At the beginning of the year, Walgreens stopped accepting prescriptions from Express Scripts.

Maryland has 58 Walgreens pharmacies. About a third of the state’s 24-hour pharmacies are Walgreens. According to Timmons, about 32,000 state employees fill prescriptions at Walgreens.

“Now you’re saying to the people, ‘No, you have to go to a completely different chain.’” Franchot said.

Timmons said that 61% of state employees who go to the Walgreens pharmacy have filled prescriptions at another pharmacy. Also, she said, 98% of state employees can still get to a pharmacy that is on the plan within a few miles of their homes.

But Dave Blair, the chairman and CEO of Catalyst, said that if Catalyst took Walgreens out of its own proposal, Catalyst would have posted a larger savings.

Express Scripts Senior Regional Director Ron Tyson said that the bids were finalized well before Walgreens decided it did not want to work with Express Scripts. The contract cost that is expected to save the state $100 million “was evaluated as if Walgreens was still there,” Tyson said.

Foster said that if the Express Scripts contract brings additional savings, that money will go into the general fund. It will not go to the company.

Rebidding suggested

Blair advocated rebidding the entire contract – or at least re-evaluating it. Too much had changed when Walgreens had decided not to work with Express Scripts anymore.

Foster called that a terrible idea. Three years had been spent getting to the point where there was a contract to consider, and it would take three more to rebid the contract. She said that the bid evaluation process had gone through, and the Board of Contract Appeals had found the recommendation for Express Scripts to be “thorough, careful, thoughtful and well-reasoned.”

Additionally, Foster said that rebidding the contract would have a chilling effect on all future procurement in the state.

“It would hurt future competitive bidding because it would be seen as an endless process, and incumbents would be given a tremendous advantage.”

Kopp said that the contract needed to be awarded on Wednesday.

“I see no reason after all this time to right now upset the entire procurement process and not award the contract as recommended by the evaluators and department,” Kopp said.