Dispute delays drug program

Price negotiation awaits contract ruling

January 19, 2007|By Melissa Harris | Melissa Harris,sun reporter

A dispute over a $1.4 billion contract is stalling a new program that would enable businesses and local governments to negotiate lower drug prices by harnessing the bulk purchasing power of state employees.

Early last year, state officials selected CatalystRx of Rockville to administer the pharmaceutical pool - as well as provide drug coverage to more than 200,000 state employees, retirees and their dependents through the mammoth contract, one of the state's largest.

But CatalystRx was not the lowest bidder. Budget officials selected the company even though its price was $13.2 million more than another contender - Caremark - during the course of the five-year contract.

A company Caremark purchased in 2003, AdvancePCS, has held the state pharmacy contract for more than 12 years, said Joel Leberknight, the state's procurement chief. It has become embroiled in legal problems outside Maryland.

Catalyst ranked first on a grade for quality ahead of Caremark. Catalyst was selected because the quality mark "had more weight" than price, according to the state's recommendation.

But the explanation did not sit well with Caremark, which has filed at least three bid protests. The three-member State Board of Contract Appeals heard arguments on the first two complaints in September and will issue a ruling after another round of closed hearings in Baltimore next week.

"This is the longest dispute I've ever been involved with," said Leberknight, a 24-year veteran of state government.

The General Assembly created the Maryland Rx program by a unanimous vote two years ago. The goal was to allow local governments and businesses to piggyback onto the state employee program in a pharmacy purchasing pool.

"It's frustrating that this has not been realized because of this continued protest," said Del. David D. Rudolph, a Cecil County Democrat who introduced the legislation.

Rudolph said that the pool would save counties and cities, in particular, "significant amounts of money that could be spent elsewhere."

"It's my intent to pursue added legislation, if necessary, to get this done," he said.

Scott Livingston, a Greenbelt attorney representing Caremark before the three-member board, said that the company had no comment. The substance of Caremark's complaint is sealed under a confidentiality agreement.

Had Catalyst's contract been approved by the Board of Public Works, the company would have started work July 1, 2006. The protests have forced the state to extend Caremark's existing contract twice.

Should the contracting board rule against Caremark, the company could challenge the decision in state court - delaying the program further.

Catalyst is a subsidiary of HealthExtras Inc., also based in Rockville. The company also provides drug coverage to state employees in Louisiana, New Mexico, Nevada and Mississippi, he said.

Caremark is facing a lawsuit from shareholders over business decisions by its chief executive and a hostile takeover attempt from another company.

Caremark's stock option practices also are under investigation, and in 2005, the company paid whistle-blowers $137.5 million after they accused AdvancePCS -the firm Caremark bought in 2003 - of accepting kickbacks from drug companies for promoting the use of their drugs, according to the Associated Press. The settlement involved no admission of wrongdoing on the part of Caremark or AdvancePCS.

Former Ehrlich administration budget director Cecilia M. Januszkiewicz said her department's decision to select another provider had nothing to do with Caremark or AdvancePCS' troubles.

melissa.harris@baltsun.com

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