NJ Health Care Contract Unraveled by Appeals Court

JERSEY CITY, N.J. (CN) – A New Jersey appeals court ordered the rebidding Friday of a $6.6 billion contract to administer health care for Garden State workers.

The 74-page ruling says New Jersey’s Division of Purchase and Property erred when it awarded the contract to Minnesota corporation OptumRx despite a bid protest from Express Scripts, the incumbent vendor.

Writing for a three-judge panel, Judge Allison Accurso called for contract to be rebid “as expeditiously as possible” by New Jersey’s Department of Treasury and the Division of Purchase and Property.

“Whether that can occur in sufficient time to allow the vendor to prepare for open enrollment next October is a matter we leave to the acting director,” Accurso added.

The three-year contract at issue is the selection of a pharmacy benefits manager to administer the self-insured, prescription drug plans for the approximately 835,000 active employees, retirees and dependents participating in the State Health Benefits Plan and the School Employees’ Health Benefits Plan.

Judges Carmen Messano and Francis Vernoia concurred in the ruling from the New Jersey Superior Court’s Appellate Division.

It says that, by including nonconforming language, OptumRx reserved the right to modify the remainder of its bid pricing based on changes to the formulary.

“Optum improperly hedged its bid to shield itself against anticipated Plan Design changes,” the ruling continues. “That invalidated its bid and the contract award on which that bid was based.”

Such language “provided [OptumRx] it a clear competitive advantage over the other potential bidders by permitting it to offer price terms while reserving the right to change them in the event of anticipated plan design changes to the Formulary or any reduction in the scope of work, including but not limited to Specialty Pharmacy services,” the order states.

Maeve Cannon, an attorney with Stevens & Lee, argued the cause for incumbent vendor Express Scripts Inc.

The Division of Purchase and Property was represented by Assistant Attorney General Beth Leigh Mitchell.

The judges also found that the acting director of the Division of Purchase and Property never undertook a bid conformity analysis.

Accuro wrote in the order: “The director is never free to accept a bid containing a material deviation from the terms of the solicitation for bids. Nor is he free to sidestep a bid conformity analysis by simply declaring the alleged nonconformity to be of no effect under the terms of the RFP [bid solicitation].”

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