WRAL Investigates

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

Posted December 17, 2009 6:00 p.m. EST
Updated December 17, 2009 6:57 p.m. EST

— 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.

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.