State officials say the motivation behind a no-bid contract to provide diabetes supplies for people on Medicaid was the need to cut costs in difficult budget times.
But critics - from government watchdogs to health educators - say North Carolina may have been too quick to embrace such contracts after awarding the diabetes contract to a company whose owners have a troubled business history. They also question whether the use of such contracts provides the sort of transparency in government that Gov. Bev Perdue promised.
The state Medicaid office has signed Charlotte-based Prodigy Diabetes Care to a two-year contract to provide supplies for about 50,000 people on Medicaid who have diabetes.
Prodigy is run by two brothers, Ramzi Abulhaj and Rick Admani, who have been involved in a string of legal battles involving companies they started in Florida, including a bankruptcy and lawsuits alleging patent piracy.
The state signed a contract with the little-known company in October, two months after Prodigy was founded. Until word leaked about the no-bid contract, competitors, retailers and diabetes educators were unaware that state officials had been talking to Prodigy's parent company for months. People with diabetes on the government health insurance program did not know they would need to get new meters to monitor their blood glucose levels.
"We weren't given all the information up front," said Andy Ingram, owner of Home Assist Medical Equipment in Laurinburg.
"We were given information in bits and pieces," said Ingram, a retailer who will distribute the Prodigy equipment to patients. "We're finding things out after they actually occurred."
The Prodigy contract is one of several no-bid deals the state Department of Health and Human Services has signed in the last few months, using special powers granted last summer by the state legislature. Legislators hoped the state agency would save money by eliminating time needed to request and evaluate bids.
Bob Phillips, executive director of Common Cause North Carolina, said no-bid contracting practices should be reviewed and made consistent, and the reasons for eliminating competition made narrower and more clearly defined.
"I think it sends a bad signal to the public at a time when there is already a lot of suspicion about how open things are in state government," Phillips said. "I think the governor has made great strides. There still remain questions, and this just adds to that."
DHHS Secretary Lanier Cansler has said the department is pushed to squeeze savings out of the fast-growing Medicaid program. The contract with Prodigy is estimated to save the state $4.4million over two years.
"This contract is short term and allows savings of millions of dollars," Chrissy Pearson, a spokeswoman for Perdue, said in a written statement. "The secretary has confirmed with the governor that his department is monitoring closely the quality and accessibility of this product while protecting the quality of patient care."
Senate Minority Leader Phil Berger, an Eden Republican, said no-bid contracts should be exceptions and that agencies have an obligation in those cases to make sure the state is getting quality services at competitive prices.
In circumstances where agencies want to move quickly, it may be a good idea to seek informal bids from several companies to find the best deal, Berger said.
"We're talking about taxpayers' dollars," he said. "The obligation is to be very careful with that money."
Sen. William Purcell, a Laurinburg Democrat who helps write the budget for DHHS, has fielded complaints about Prodigy and has heard that the state might face a lawsuit from those who don't like the no-bid contract.
Legislators told DHHS to wring out savings in a time when more people are signing up for Medicaid but the state budget is shrinking.
"It's hard to tell them to save money, then say we don't like what you're doing," Purcell said.
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