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State workers to get new pharmacy plan

Board of Public Works awards contested $2.4 billion contract

By Michael Dresser, The Baltimore Sun

9:02 PM EST, February 8, 2012

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More than 200,000 Maryland state employees, retirees and dependents will switch to a new pharmacy plan as a result of the Board of Public Works' decision Wednesday to award the $2.4 billion contract to a St. Louis-based company.

When the transition take place in May, plan members will no longer be able to fill prescriptions at one of Maryland's 58 Walgreens stores. The chain is not part of the network operated by the new provider, Express Scripts Inc.

The contract was fiercely contested. Walgreens, along with incumbent contractor Catalyst Rx of Rockville, challenged the award before the three-member board and won the vote of Comptroller Peter Franchot. But Gov. Martin O'Malley and Treasurer Nancy K. Kopp rejected the contention that Walgreens' absence was sufficient reason to throw out a contract process that had dragged on for more than a year. All three are Democrats.

Express Scripts pointed out that its network includes most of the other major pharmacy chains in Maryland, including Rite Aid, CVS, Giant Food and Walmart. State Budget Secretary T. Eloise Foster, who defended her department's decision to award the lucrative five-year contract to the out-of-state firm, said Express Scripts' network exceeded the state's specifications even without Walgreens.

Her department estimated that switching to Express Scripts, the low bidder on price, would save the state more than $100 million over the term of the contract.

The Walgreens issue surfaced last year — after Express Scripts had been tentatively chosen — as the pharmacy benefits manager and the drugstore chain severed ties. The companies tangled over Express Scripts' contention that Walgreens was seeking higher prices for drugs than other pharmacies. Walgreens left the Express Scripts network Dec. 31.

Franchot argued that the procurement process had been unfair to a Maryland-based company that had performed well under the current contract.

"Our only standard for this board is doing what's in the best interest of the state," he said. He characterized the absence of Walgreens as a "gaping hole" in the Express Scripts network, a characterization Foster rejected.

Kopp, interviewed after the meeting, said she saw the fight between Express Scripts and Walgreens as a national dispute that "got dragged into this procurement."

The treasurer, pointing to the expected $100 million savings, said the board has a duty to seek the best deal for taxpayers regardless of where the bidding companies are headquartered. "Basically it's almost impossible under our laws to reward in-state preference," Kopp said.

Catalyst fought back hard after a selection panel in the budget department evaluated the competing bidders and chose Express Scripts under a process that is intended to be insulated from political pressures. The panel scored the Maryland company higher on some aspects, but found that the out-of-state firm submitted the better financial offer.

Catalyst took its case to the Maryland Board of Contract Appeals, where it lost.

O'Malley said Catalyst had been given every opportunity, including a year's extension of its contract while it took its case to the appeals board.

"Going back and changing plans because of Walgreens doesn't make sense now," the governor said.

Catalyst is among the companies with business pending before Maryland government that have donated hefty amounts to the Democratic Governors Association, which O'Malley heads. The company donated $100,000 last October.

"Nothing would have made me happier than for the Maryland company to have won this on price," O'Malley said. But he noted that while the appeals board had found flaws in the budget department's award procedures, it ultimately ruled the process had been "professional and exhaustive" and followed the law.

The board's vote came after almost two hours of debate before the panel involving the rival bidders, Walgreens, the state's consultants and an assistant attorney general.

michael.dresser@baltsun.com