No-bid DHHS contracts questioned

Lawmakers allowed the no-bid contracts so DHHS could save time and money during a difficult budget year. Department officials maintain that the contracts are with companies with proven track records and can provide better value.

Still, some people question the fairness of the deals and the potential for conflicts of interest.

"No-bid contracts are bad government," said Adam Searing, director of the North Carolina Health Access Coalition, a group that advocates health care reform to benefit uninsured people.

Searing notes that DHHS Secretary Lanier Cansler was a lobbyist before Gov. Beverly Perdue picked him in January to run the state's largest agency. Three of the five no-bid contracts awarded in recent months have gone to clients of his former lobbying firm: two to the Carolinas Center for Medical Excellence and one to SAS Institute.

CCME's contracts, valued at $29 million total, are to review personal care services and outpatient therapies for determination of clinical necessity. DHHS officials estimate they will save the state at least $24 million.

SAS has an $800,000 subcontract on a $229 million Medicaid information systems contract that was awarded through a competitive bidding process in 2008.

DHHS spokesman Brad Deen said Cansler "has taken deliberate actions to abstain himself from dealings and negotiations involving former clients." He cited a June 9 memo Cansler issued to Deputy Secretary Allen Feezor in which Feezor and other officials were instructed to handle any contract decisions involving Cansler's former clients.

"I don't think, from what I've seen, anything untoward is going on from (Cansler's) perspective, but it gives the appearance of favoritism. That's the problem with these no-bid contracts," Searing said.

Another of the no-bid contracts went to Charlotte-based Prodigy Diabetes Care LLC, which makes diabetes testing equipment. Officials estimate the two-year, $27 million contract will save taxpayers $4.5 million.

Raleigh pharmacist Mike James said he never heard of Prodigy before its blood glucose meters started showing up on his shelves in recent months. Now, the company's monitoring products are the only ones that his customers on Medicaid can buy.

"It is concerning to me. We haven't seen any history on this product," James said.

Federal records show the owners of Prodigy previously ran a company called Vitalcare that filed for bankruptcy after getting sued for patent infringement. The FDA also issued safety warnings for Vitalcare's manufacturing plant in China.

Charlotte used incentives to convince Prodigy's parent company, Diagnostic Devices Inc., to move its headquarters and manufacturing to the Queen City. With the new state contract and tax incentives, the company has promised to add space and jobs.

James said the lack of a track history for Prodigy raises questions for him.

"Is the product going to be in the pharmacies as people need them because of the toughness in supply?" he said. "Is the product going to work efficiently?"

The fifth no-bid contract went to MedSolutions to reduce redundancies and inefficiencies in radiological imaging. The two-year, $230 million deal is expected to save the state $77 million, DHHS officials said.