174 So. 3d 683
La. Ct. App.2015Background
- OGB (Office of Group Benefits) issued a Notice of Intent to Contract (NIC) for pharmacy-benefits-management services for a three-year term beginning Jan. 1, 2014; Catamaran was the incumbent provider.
- Proposals were submitted by Catamaran, CVS Caremark, Express Scripts (ESI), and MedImpact; CVS was eliminated earlier from finalist consideration.
- The NIC initially barred subcontracting of the EGWP (Medicare Employer Group Waiver Plan) sponsor, but in the Questions & Answers phase OGB permitted the EGWP to be provided through an affiliate under “common control” of the primary proposer.
- MedImpact proposed that its wholly owned subsidiary, MedGenerations, would administer the EGWP while Stonebridge was the CMS-contracted PDP sponsor under a Master Service Agreement.
- Catamaran protested after award, arguing MedImpact’s proposal was nonresponsive (unaffiliated subcontractor) and that OGB failed to make a required responsibility determination; OGB and the Commissioner denied the protest.
- The district court (appellate review) affirmed; the state appellate court likewise affirmed, finding OGB’s discretion and evaluation were not arbitrary or capricious.
Issues
| Issue | Catamaran's Argument | OGB/MedImpact's Argument | Held |
|---|---|---|---|
| Whether MedImpact’s proposal was nonresponsive for using an unaffiliated subcontractor to provide EGWP sponsor services | MedImpact disclosed Stonebridge as the CMS PDP sponsor, so the proposal violates NIC’s ban on non-affiliate subcontracting | The Q&A modified the NIC to allow EGWP services through an affiliate under common control; MedGenerations (wholly owned subsidiary) would be the primary provider/administrator, so proposal complies | Court held proposal responsive because Q&A allowed affiliate arrangements and record supports MedGenerations as primary provider |
| Whether OGB failed to determine MedImpact was a "responsible proposer" before award | OGB did not perform the statutorily required responsibility determination prior to awarding the contract | OGB and its Evaluation Committee reviewed financials and relevant information and considered MedImpact a responsible proposer along with other finalists | Court held OGB adequately considered responsibility and did not err |
| Whether OGB’s modification of NIC and evaluation was arbitrary or capricious | The modification and award were arbitrary, risky, and lacked transparency (no Master Service Agreement in record) | OGB exercised permissible discretion in negotiations; evaluation and scoring were within agency expertise | Court found no abuse of discretion; affirmed award as not arbitrary or capricious |
| Whether record deficiencies (e.g., missing Master Service Agreement) require setting aside award | Missing contract and limited documentation show inadequate evaluation and risk to state | Despite missing documents, the administrative record does not show OGB failed to investigate or acted arbitrarily; deference to agency decision applies | Concurring judge expressed concern about record gaps but agreed outcome must be affirmed under the applicable deferential standard |
Key Cases Cited
- United Healthcare Ins. Co. v. State ex rel. Div. of Admin., 103 So.3d 1095 (2012) (standard of review and deference to agency procurement decisions)
- Willows v. State, Dept. of Health & Hospitals, 15 So.3d 56 (2009) (scope of LPC and state procurement regime)
- Fleetcor Technologies Operating Co., LLC v. State ex rel. Div. of Admin., Office of State Purchasing, 30 So.3d 102 (2009) (agency discretion in awarding contracts to most advantageous proposer)
- Executone of Central Louisiana, Inc. v. Hospital Service Dist. No. 1 of Tangipahoa Parish, 798 So.2d 987 (2001) (deference to agency expertise in procurement evaluations)