WRAL Investigates

N.C.'s no-bid contract for diabetes equipment sparks protest

Posted December 17, 2009

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— A stack of dozens of protest letters show the amount of unhappiness over a decision by the North Carolina Department of Health and Human Services to award a company a $30 million no-bid contract for diabetes equipment.

The WRAL Investigates team obtained copies of the complaints through a public records request. The letters target DHHS and Prodigy, an upstart diabetes equipment company that was awarded the contract.

State's $30M no-bid contract under fire State's $30M no-bid contract under fire

Pharmacists, diabetes educators and competing companies raised numerous concerns about DHHS’ decision to pick Prodigy Diabetes Care, LLC as the sole source diabetes equipment provider for North Carolina Medicaid patients.

The Advanced Medical Technology Association wrote a letter to Gov. Bev Perdue to express "strong concern with the process" to issue the no-bid contract.

"While we understand the cost containment pressures, it appears that in an effort to expedite a sole-source supplier contract, the Division has denied other manufacturers the opportunity to submit bids, which could provide the state as well as patients with a better value," wrote Thomas Tremble, associate vice president of state government relations.

Kim Hanchette, president of the Research Triangle Association of Diabetes Educators, said "Prodigy meters were not only under the radar, they were off the radar."

Hanchette says diabetics become attached to specific monitoring equipment.

“Well, they’re just different,” she said. She believes forcing change to a new, virtually unknown product raises the prospect for problems. “It will probably just result in a lot of people testing less often, which of course is dangerous.”

DHHS Secretary Lanier Cansler said he was forced to cut his budget and estimated that the Prodigy contract will save the state more than $4 million.

“We understand that other companies, people used to other products, will be resistant to change. We don't have a lot of choices right now,” he said.

The state sought speed and savings in signing Prodigy, but federal court records show a rocky business history for the company's owners.

Ramzi Abulhaj and Rick Admani previously owned Vitalcare based in Miami. The diabetes equipment company was sued for patent infringement. After a settlement, a judge threatened to put the men in prison if they kept selling questioned products.

Vitalcare eventually filed for bankruptcy. Then, the trustee in charge of the reorganization sued claiming millions of dollars were transferred to other companies.

“There were a lot of cash transfers back and forth, which really raises a red flag for a trustee,” said Raleigh bankruptcy attorney David Warren, who isn’t involved in the case. “Absolutely, they should look behind it. That would be prudent.”

When asked if his department has done due diligence to investigate the company, Cansler said he has “been assured that the references have been checked about the product and the availability of product and the quality of product and everything is fine.”

“Have we checked all the history of the individuals who may own the company and background? I don't think we have,” Cansler said. “That is not something we would normally do. We're worried about now.”

During their legal fights, the owners started new businesses in Charlotte. Recently, Prodigy's affiliate company, Diagnostic Devices Inc., was named the area's fastest-growing private company after announcing it was bringing more than 100 new jobs to the state.

“That had nothing to do with them getting this contract,” Cansler said.

The WRAL Investigates team examined Prodigy's 27-page contract with the state and found one page with five blank boxes and the vice president of sales' signature at the bottom.

The document requires an explanation for any unchecked boxes, which Prodigy officials left blank.

When WRAL brought it to DHHS officials' attention, they called it an "oversight" and contacted Prodigy. Company officials filled out the page but still left blank a box about fiscal health. They explained that the company started in 2009 and would be audited at a later time.

In a statement to WRAL News, Prodigy spokesman Pete Bosak said jealous competitors have stirred unwarranted criticism.

“Our billion-dollar competitors of course are going to complain, as they could not match our quality, technology, ease of use and prices and thus were not awarded a contract,” Bosak said. “That is to be expected. And our competitors no doubt were behind some of the letters of concern, written by medical professionals, at their urging.”

As for Vitalcare, Bosak said the company “is defunct and has no impact whatsoever on Prodigy." Despite the past settlement, he called the patent-infringement suit "false." He also disputed the transfer and said it was "a mistake and the money was returned."

Secretary Cansler said he hears all the controversy about the no-bid contract, but he's focused on the future.

“We're not taking it lightly, and we're monitoring to make sure there's not a change in the effectiveness of this service,” he said.

13 Comments

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  • amymcrel11 Dec 18, 2009

    I would like to add that these meters came out of nowhere! I work in large multispecialty practice as a nurse and none of us have EVER heard of or seen these meters before the flyers from Medicaid came to us in the mail last week. I hope they are easy to use-they all have audio features that read the glucose level out loud. How can buying all medicaid patients in the state a new meter save 4 million dollars? Something is rotten in NC! Other medicaid changes-no more fibrate drugs covered unless a pt uses generic Gemfibozil for 60 days in the last 12 months 1st. What if the person tried it 2 years ago and it did not work? Why would it work any better this time? Strange how the minds of the powers that be work.

  • rogers922 Dec 18, 2009

    hereandnow- I understand your question and your reason for asking it. The manufacturer of the new meter SHOULD have done comparison testing on their prototype before their quantity manufacturing. They SHOULD have had all the major brands in their lab to make a quality analysis before quantity production. All this testing should have been done by the manufacturer and should be on record with the manufacturer. It would not cost the state a dime to get these records and lab analysis reports and review them. I have seen no mention that these tests were requested by the state to review this meter's performance before the no-bid contract.

  • JustOneGodLessThanU Dec 18, 2009

    rogers922, of course your way makes more sense. But, who will you pay to perform all of those comparison studies that you mention?...or studies that a diabetic doctor might recommend?

    Do you think research is free, quick & easy?

    No, this is the low-bid market that gov't is often pushed into. And 'round here, the people are screaming for gov't to cut costs...and here we are.

    Then, the same people scream that gov't is ineffective. Well, you just cut them off at the knees and are asking them to run. When they can't, you say, "See! I told you they couldn't do it."

  • WHEEL Dec 18, 2009

    How does Cansler know he saved $4 million if he had no competetive bids?

  • commonsence Dec 18, 2009

    WOW,,, I can’t believe that anyone would do business with this company and their owners,,, I guess we need some competent people over seeing the state decision makers, or just get good people,,, the state will end up loosing and so will the poor people who need to test

  • rogers922 Dec 18, 2009

    Hereandnow - I have no problem with cutting the budget. Yes, it needs to be done and I will do my part - however, let's use proven, reliable equipment. I want to see the results of this meter's performance against Bayer, Accu-Chek, Freestyle and others. I want to see the comments from the beta users. I want to see the actual cost of the meter and strips in comparison to others. It is not the meter that is expensive - you can get them free and for less that $30 in most stores...it is the strips that are costly. I want to see these results. Shoot, the strips could be free but if the meter does not perform accurately you are now spending MORE on doctor visits, hospitalization and medications so the savings is naught. I would love to see WRAL do a comparison of this meter against others. Again, I have no problem with saving money, but I want to make sure my health doesn't suffer because of the equipment.

  • JustOneGodLessThanU Dec 18, 2009

    Keep cutting NC's budget and you go with the lowest bidder. They are making do with what they got.

    Got a problem with that? Maybe people will realize that their actions have consequences and they, themselves, may be affected by cuts.

  • colliedave Dec 18, 2009

    typical of NC politics

  • John Sawtooth Dec 18, 2009

    I'm a Type 1 diabetic, and am familiar with a variety of meters.

    There does not appear to be any major grumbling among diabetics about Prodigy meters. Prodigy makes several meters, but the article doesn't say which version (or all ?) will be purchased. The different Prodigy meters use different test strip types, all incompatible with each other (this is a problem with many brands, not just Prodigy).

    Regarding specific features & usability, all diabetics need to be able to test with different meters in case of emergency. Unless a person has serious vision or dexterity issues, minor changes in how one brand operates vs another should not be an issue. Diabetes means learning a lot of new skills just to survive. A new meter should not be a big deal for most diabetics.

    To use a car analogy, this merely appears to be a Kia meter instead of a Lincoln. I'm more concerned that they appear to have circumvented the legally mandated bidding process.

  • djcgriffin Dec 18, 2009

    rogers922 - This issue worries me ALOT. I have several loved ones living with type 1 diabetes and I dont want anything to happen to them because of the state's carelessness and lack of research. Is there anything that I could do to help?

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