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MedExpress pharmacy takes state to court over AIDS drugs

By Mark Wineka
mwineka@salisburypost.com
MedExpress has taken on North Carolina’s method of supplying drugs to roughly 3,000 clients who come under the state’s AIDS Drug Assistance Program.
The Salisbury pharmacy, headed by David and Jon Post, challenges the state’s use of Pittsburgh-based PharmaCare (a division of CVS) as the sole-source provider for drugs to ADAP clients.
The medications for HIV/AIDS clients in the ADAP program actually flow from an N.C. wholesaler in Greensboro to PharmaCare in Pittsburgh and by two-day delivery back to the clients in North Carolina.
The Posts question the practice and the 2008 contract awarded to CVS. They say it’s silly for $40 million a year in drugs to be shipped from Greensboro to Pittsburgh and then back to North Carolina when an N.C.-based pharmacy could serve ADAP patients better.
They contend the current setup is sending six to 10 jobs out of state with their related wages and taxes.
They also cite a “spillover effect” of an additional $10 million in Medicaid money being sent annually to Pennsylvania because about half the ADAP clients eventually qualify for Medicaid and CVS continues to be their drug supplier.
“Why should North Carolina be sending millions of tax dollars out of state every month?” David Post asks. “… It’s a complex issue, but there’s a lot of money at stake that people should be aware of. This thing just flew under the radar.”
How N.C. ADAP clients receive their medication is of interest to MedExpress because it is an HIV/AIDS specialty mail-order pharmacy doing precisely what the ADAP contract calls for.
MedExpress filed a protest in June 2008 after PharmaCare won the latest contract for the N.C. ADAP.
The Salisbury pharmacy also sued the state during the same month ó a separate action in which David Post and Salisbury attorney Stephen Gray were co-counsels.
On a technicality, State Purchasing Officer James D. Staton ruled July 10 that the MedExpress protest was valid and that PharmaCare’s existing contract should be canceled, with the whole thing going out for rebid.
Staton emphasized in his decision that on most points, the MedExpress protest should be denied, but he did find error in the procurement process “resulting from the failure to include the scoring matrix used by evaluators.”
David Post says he disagrees with most of the things Staton cites in evaluating the overall protest, but he agrees with the outcome.
“The point is we won,” he says.
In 1990 Congress passed the Ryan White Care Act to improve the availability of care for low-income, uninsured or under-insured HIV/AIDS victims. Ryan White programs are considered “gap” funding, when no other financial resources are available to a patient.
A portion of Ryan White Care Act funding goes to ADAP programs throughout the country to provide prescription medications to people who qualify.
In 1992, Section 340B of the Public Health Service Act was enacted requiring drug manufacturers to provide outpatient drugs at a discount to “covered entities” as a way to lower prescription medication costs.
The N.C. ADAP qualifies as a covered entity under 340B. Approximately 3,000 clients in North Carolina receive 3.3 prescriptions per month, or an average of 400 prescriptions a day.
In 2004, the N.C. Department of Health and Human Services decided to go with a single-source pharmacy for the ADAP program in an effort to reduce costs and serve more clients.
Pittsburgh-based PharmaCare, a CVS-Caremark company, won that contract, which took effect in July 2005.
The Posts say that in May 2005, ADAP officials realized that to operate the 340B program, the contract must be with a pharmaceutical wholesaler. By June, ADAP entered into an agreement with Cardinal Health Care to provide drugs to PharmaCare.
Cardinal used its Greensboro distribution center to send the HIV/AIDS drugs to PharmaCare, even though Cardinal had 12 other distribution centers closer to Pittsburgh, MedExpress says in the lawsuit.
The next N.C. ADAP contract was awarded in June 2008, when PharmaCare again was chosen. MedExpress bid on that contract, lost, then filed its protest and lawsuit.
ADAP clients become ineligible for the program if they become eligible for Medicaid.
MedExpress contends that about 50 percent of the N.C. ADAP clients become eligible for Medicaid over a year, and the profit margin for Medicaid is greater than the ADAP contracts.
Since July 1, 2005, MedExpress claims, PharmaCare has filled prescriptions for thousands of ADAP clients who later became eligible for Medicaid.
N.C. Medicaid granted the only exception to its own regulations for an out-of-state pharmacy to fill Medicaid prescriptions to accommodate the award, David Post says.
“Which wasn’t necessary, since any North Carolina pharmacy could still fill Medicaid prescriptions when an ADAP patient becomes eligible for Medicaid,” he adds.
Post says CVS has four state ADAP contracts of this nature.
“The other 46 states and D.C. use other models employing in-state providers for their ADAP programs,” Post says.
MedExpress says the state’s Request for Proposals calls for bids that are fair, impartial, comprehensive and “in the best interest of North Carolina.”
The Posts argue that the ADAP contract fails on all those counts.
They also find it strange that the Request for Proposals never asks, “What do you do for the patient?” David Post says.
“Essentially, we think we take better care of the patient,” he adds.
MedExpress is proactive with its client base, calling its customers every month to make sure they are taking and managing their medications properly and are not in danger of running out.
Jon Post says many people under the ADAP program need help with managing their disease, and MedExpress works closely with client management advocates to make sure that happens.
As opposed to Pittsburgh, he adds, the Salisbury pharmacy is within a two-hour drive of 80 percent of the ADAP clients and within an hour’s drive of 60 percent. It could provide next-delivery at the least and same-day delivery if needed, he says.
The state’s position on this whole matter is reflected in Staton’s comments connected to the protest ruling.
Staton disagreed with MedExpress’ argument that it should have been given preference over PharmaCare because it is a small business and an N.C. company. The state statute in question does not create any preference to award contracts to small businesses, Staton said.
General Statute 143-48 “simply states the legislative policy to encourage and promote the use of small contractors …,” Staton said.
PharmaCare’s bid also was $230,175 cheaper than MedExpress, according to Staton.
The MedExpress cost per prescription was $12.70, making an estimated annual cost of just over $1.5 million and a three-year cost of just over $4.5 million. PharmaCare’s cost per prescription was $11.70, and its three-year cost was just under $4.3 million.
As for the Medicaid spending, Staton said the MedExpress complaint was an unrelated issue that it should take up with DHHS, the General Assembly or the Governor’s Office.
Staton added that MedExpress would have been disqualified had it been awarded the 2008 contract.
MedExpress wrote letters to the secretaries of DHHS and the Department of Administration requesting meetings about the bid application. Those letters clearly communicated the content of its bid proposal and qualified as seeking special treatment ó grounds for disqualification, Staton said.

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