Omnicare, Inc. v. Department of Public Welfare
2013 Pa. Commw. LEXIS 141
| Pa. Commw. Ct. | 2013Background
- DPW awarded a pharmaceutical contract for five Developmentally Disabled Centers to Diamond Drugs, Inc., displacing Omnicare as incumbent vendor.
- Omnicare protested to the Final Agency Determination that denied its protest as untimely and argued DPW violated the Commonwealth Procurement Code and misapplied the MA pricing formula.
- RFP 18-09 stated no price submittal and that the winning bid would be ranked 80% on technical elements and 20% on DBE/enterprise goals; it referenced MA and Medicare billing mechanics for pricing.
- The Final Determination held Omnicare’s protest untimely, found no Code violation due to MA pricing, and ratified the contract as in the Commonwealth’s best interests under 1711.2(2).
- Omnicare appealed, arguing (a) timeliness based on RFP terms did not alert them to noncompensable drugs, and (b) DPW violated 513 by not considering price for non-compensable drugs; DPW argued ratification cured any defect.
- The court reversed the Final Determination, voided the contract under 1711.1(3), and held that DPW unlawfully solicited and failed to consider pricing for non-compensable drugs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of the protest | Omnicare could not know the protest basis from RFP 18-09 and filed after the contract posting. | RFP 1-29 required seven-day protest after contract notice; Section 1711.1(b) governs timing regardless of posting location. | Protest timely; seven-day period triggered by contract posting on DGS site. |
| Use of MA pricing for non-compensable drugs | DPW violated the Code by using MA pricing for non-compensable drugs and not soliciting pricing for those drugs. | RFP 18-09 anticipated MA pricing for drugs; all drugs to be included; cost structure did not require price submittal. | DPW violated §513(g) by not considering price for non-compensable drugs; contract void. |
| binding effect of ratification under 1711.2(2) | Ratification cannot cure a fundamental Code violation that tainted the procurement. | Director ratified contract as in Commonwealth's best interests despite alleged defects. | Ratification cannot validate a fundamentally unlawful solicitation; void contract. |
| Contract voidability under 1711.1(3) | DPW’s process violated procurement law and thus contract should be voided. | DPW defended the decision as best interest and ratified. | Contract declared void; procurement process unlawful. |
Key Cases Cited
- Department of Public Welfare v. UEC, Inc., 483 Pa. 503 (Pa. 1979) (estoppel not applicable to toll limitations without misrepresentation or concealment)
- Common Sense Adoption Services v. Department of Public Welfare, 799 A.2d 225 (Pa. Cmwlth. 2002) (handbook violation; disclosure issues; discussed ratification context)