R408--Pharmacy Benefit Manager (PBM) Retail Pharmacy Claim Adjudication

Pharmacy Benefit Manager (PBM) Retail Pharmacy Claim Adjudications Contractor Contract NTE Estimated Value CLINS Awarded OPTUMRX ADMINISTRATIVE SERVICES, LLC 36C79122C0006 $0.00 CLINS: 1-3 DEPARTMENT OF VETERANS AFFAIRS Justification and Approval (J&A) For Other Than Full and Open Competition (>SAT) Acquisition Plan Action ID:_________ 36C791-22-AP-0085_____________________________ Contracting Activity: Business Activity: Department of Veterans Affairs Veteran Family Member Programs National Acquisition Center Ptarmigan at Cherry Creek Commodities & Services Acquisition Service (CSAS) 3773 Cherry Creek North Dr, Ste 450 555 Corporate Circle Denver, CO 80209 Golden, CO 80401 Nature and/or Description of the Action Being Processed: This document sets forth the justification and approval for other than full and open competition for the acquisition described herein, under the authority of Federal Acquisition Regulation (FAR) subpart 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. The National Acquisition Center (NAC) of the Department of Veterans Affairs (VA) Office of Procurement, Acquisition, and Logistics (OPAL) seeks approval to enter into a sole-source contract with OptumRX Administrative Services, LLC (OptumRx), to provide Pharmacy Benefits Manager (PBM) services to the Veterans Health Administration s (VHA) Integrated Veteran Care (IVC) Veteran Family Member Program (VFMP). The current PBM contract# 36C79122C0001 will expire on September 30, 2022. Award of the sole-source contract will ensure continuous availability of pharmaceuticals to VFMP pharmacy benefits programs. The proposed contract action is for a Firm-Fixed Price (FFP) contract for the period from October 1, 2022 to September 30, 2023. Description of Supplies/Services Required to Meet the Agency s Needs: The sole-source contract is to fill the gap between the current bridge contract and the re-compete effort intended for FY2024. The current contract is with the service provider who is capable to accept and submit Health Insurance Portability and Accountability Act (HIPAA) compliant electronic pharmacy transactions via compliant Electronic Data Interchange (EDI) for a nationwide network of pharmacies. The pharmacy services are provided to the beneficiaries covered by the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), 38 CFR, Section 17.270 to 17.278 to include the Caregiver Program, Spina Bifida Healthcare (SB), Children of Women Vietnam Veterans (CWVV) Health Care Benefits Program, and 38 CFR, Section 17.900 to 17.905 throughout the 50 United States, District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, the Northern Marianas Islands, the American Samoa, and the Minor Outlying Islands. The estimated prescription activity based upon fiscal year 2021 data for all programs is approximately XXXXXXXXXX prescriptions for approximately XXXXXXXXX active PBM enrollees. The contractor will work with the Program Office (PO) and Contracting Officer s Representative (COR) to accept and submit electronic pharmacy claims from the contractor s network providers at the point of sale to IVC for review and payment. The contractor will not direct, change, or engage in the formulation of VHA policy. The estimated value of the contract is XXXXXXXX. The estimate is shown in Table 1 below and includes the most recent consumer price increases used for the 2022-2023 estimates. Table 1. XXXXXXXXXXX Not included in the price of the proposed sole-source FFP contract is the cost of medicine and Dispensing Fee. The Dispensing Fee and percentage discount from the average wholesale prices (AWP) of Brand, Generic, and Specialty medicine estimate is shown in Table 2, below. Electronic claims for the price of medicine are sent by the PBM to VFMP on the National Counsel of Prescription Drug Programs (NCPDP) B1 claims file. The Dispensing Fee, if applicable, will be payable in addition to the cost of medicine. Adjudicated claims for Dispensing Fee and discounted cost of medicine will be paid by Electronic Funds Transfer (EFT) by the U.S. Department of the Treasury. Currently, the average cost per pharmaceutical (medicine) - Brand Name, Generic, and Specialty is XXXXXXXX for an annual total cost to VFMP during 2021-2022 of approximately XXXXXXX. Table 2. XXXXXXXXXXXX Statutory Authority Permitting Other than Full and Open Competition: The statutory authority permitting other than full and open competition is 41 USC §3304(a)(1) as implemented by FAR 6.302-1, which authorizes, under certain conditions, contracting without providing for full and open competition when the agency s need for the services can be provided from Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. Demonstration that the Contractor s Unique Qualifications or Nature of the Acquisition Requires the Use of the Authority Cited Above (applicability of authority): The statement of work for the bridge contract requires that the contractor have a robust network of over 68,000 pharmacies that cover the entire United States and all its territories. The contractor must also have authority to interact and operate with the VA s information technology systems and network and demonstrate compliance with HIPAA and the Utilization Review Accreditation Commission (URAC) standards. The normal timeframe for gaining authority to operate from the VA s Office of Information Technology is six months and is only initiated after contract award. Due to the above factors, there is not sufficient time (before September 30, 2022) to solicit and award a re-compete contract and gain authority to operate for a new contractor. With recent awards of other national Community Care Network contracts and dealing with commercial medical services, the time needed to gain authority to operate and establish the new PBM (to support all VFMPs) is a lengthy process. Therefore, competing this requirement at this stage, would result in substantial duplication of costs that aren t expected to be recovered by competition and/or unacceptable delays in meeting government s need for services. VFMP intended to go live with the new claims processing system, ClaimsXm, prior to the end of 2021 calendar year. However, due to a strategic decision to implement the new medical claims processing system prior to the new pharmacy claims processing system, VFMP had to move the deadline to the end of 2022 calendar year. Further, a decision was recently made to include Camp Lejeune Family Member Program (CLFMP) into this requirement. It is essential that the re-compete contract includes all ClaimsXm pharmacy system, as well as CLFMP requirements. Therefore, it is proposed that we enter into a sole-source contract with the incumbent. The incumbent, OptumRx has been performing as the PBM contractor for IVC (previously known as Office of Community Care (OCC)) since 2013, and as a sole-source contractor for the past two-and-a-half years. OptumRx has a robust network of over 68,000 pharmacies covering the entire United States and all territories and has both familiarity with the IVC business model and the requisite authority to operate and interact with the VA s information technology network. OptumRx has performed well on the current PBM contract, effectively servicing IVC s programs for Veteran family members receiving pharmacy services. Description of efforts made to ensure that offers are solicited from as many potential sources as deemed practicable, including whether a notice was or will be publicized as required by subpart 5.2 and, if not, which exception under 5.202 applies: The contracting officer issued RFI# 36C79122Q0006 on 12/10/2021 requesting industry comments on best practices, small business size standards, and capabilities. The RFI closed on 12/23/2021. The following companies expressed interest and answered the questions concerning this requirement: BUSINESS CATEGORY NAME OF POTENTIAL SOURCE(S)/OTHER POC INFORMATION Large Business Express Scripts Kevin Scully, New Sales Business Project Principal contact@example.gov +1 (555) 000-0000 Large Business OptumRx John Spankroy, Director, Account Management Public Sector and Gvmt Markets contact@example.gov +1 (555) 000-0000 Service-Disabled Veteran-Owned Small Business (SDVOSB) Palisade-Heritage Samuel Brown Chief Executive Officer contact@example.gov +1 (555) 000-0000 Large Business Walgreens James Wood Pharmacy Market Development, Vice President Federal Accounts contact@example.gov +1 (555) 000-0000 SDVOSB Vet of Hawaii Rob Reyes CEO contact@example.gov +1 (555) 000-0000 Ext: 101 XXXXXXXXXXXXXX The contracting officer issued RFI# 36C79122Q0007 - Virtual Industry Day Invitation, on 01/27/2022. The Industry Day was held on 03/03/2022 and was attended by the following businesses. BUSINESS CATEGORY NAME OF POTENTIAL SOURCE(S)/OTHER POC INFORMATION Large Business Express Scripts Kevin Scully, New Sales Business Project Principal contact@example.gov +1 (555) 000-0000 Large Business OptumRx John Spankroy, Director, Account Management Public Sector and Gvmt Markets contact@example.gov +1 (555) 000-0000 Large Business Health Plan Data Solutions Travis Watson, VP Business Development contact@example.gov +1 (555) 000-0000 SDVOSB Palisade-Heritage Samuel Brown Chief Executive Officer contact@example.gov +1 (555) 000-0000 Large Business Walgreens James Wood Pharmacy Market Development, Vice President Federal Accounts contact@example.gov +1 (555) 000-0000 Large Business JP Morgan Nicholas Masarone VP, Payments Sales Mngr. contact@example.gov +1 (555) 000-0000 SDVOSB Vet of Hawaii Rob Reyes CEO contact@example.gov +1 (555) 000-0000 Ext: 101 SDVOSB Unyter Enterprises Nancy Boner COO contact@example.gov +1 (555) 000-0000 x 100 Wellmark did not respond to the RFI. Although the VIP search under the North American Industry Classification System (NAICS) Code 524292 Pharmacy Benefit Management and Other Third-Party Administration of Insurance and Pension Funds revealed that there were 15,275 SDVOSB s available to provide services under this NAICS Code, only Vet of Hawaii and Health Plan Data Solutions responded to the RFI. The Small Business Administration (SBA) NAICS size search revealed 25 entities which provide services under 524292 Pharmacy Benefit Management and Other Third-Party Administration of Insurance and Pension Funds, however, none of them responded to the RFI. Unyter Enterprises did not participate in the event. Express Scripts, OptumRx, Health Plan Data Solutions, and Vet of Hawaii requested one-on-one meetings. These were held on the same day. Vet of Hawaii did not attend nor cancel the scheduled one-on-one meeting. Health Plan Data Solutions confirmed that they were not able to provide a PBM services. Palisades-Heritage declined their participation. Based on the Industry Day participation there are at least two (2) large companies likely to compete to provide PBM services. These are Express Scripts and OptumRx. Possibly Walgreens and JP Morgan, however, their capability statements were inconclusive as to their ability to meet the PBM program objectives. There are other companies as well, but those companies operate on a more regional basis and are not known to be national PBM contractors with as extensive network as required to meet the minimum needs of the agency. For this sole-source bridge contract, no other sources have been considered because the requirements documents are still being developed and the VA will only authorize system access six months after award. Therefore, competing this requirement at this stage, would result in substantial duplication of costs that aren t expected to be recovered by competition and/or unacceptable delays in meeting government s need for services (Ref: part 9, below). In accordance with FAR Part 6, the contracting officer will post the approved Sole-Source Justification within the System for Award Management (www.beta.sam.qov). Determination by the CO that the Anticipated Cost to the Government will be Fair and Reasonable: The Government intends to award the new FFP contract at the same cost per pharmaceutical as in contract# 36C79122C0001. The estimated value of this new sole-source contract is XXXXXXXXX and reflects the increased estimated yearly quantities. Adjudicated claims for Dispensing Fee and discounted cost of medicine will be paid by EFT by the U.S. Department of the Treasury. To ensure fair and reasonable price, in accordance with FAR 15.404-1(b)(2), the Government will compare the price in the expiring contract # 36C79122C0001 with the new IGCE estimate, prices currently paid for the same or similar products, published product price lists, current market conditions, and all other historical pricing data. Description of the Market Research Conducted and the Results, or a Statement of the Reasons Market Research Was Not Conducted: IVC s pharmacy benefits staff conducted market research for the follow on effort to the current contract. The market research shows that there are several HIPAA and URAC compliant contractors, which may compete for the follow on contract. Market research by CSAS, including the Industry Day, confirmed those findings. The Contracting Officer also reviewed the Vendor Information Pages, but the search results revealed that there are not two or more service-disabled veteran-owned small businesses and/or veteran-owned small businesses listed in the appropriate NAICS code. Although there appear to be compliant and capable firms to meet the government s requirement, given the short amount of time before the current contract expires and programming for the new claims system, it is not possible to compete this action and bring a new contractor on board before the current contract expires. Any Other Facts Supporting the Use of Other than Full and Open Competition: Estimate of the Cost to the Government from Duplication Based on the historical data, it is estimated that a new contractor will require between 6-12 months to ensure sufficient fully operational network, to execute the business associate and data usage agreements, and to ensure full compliance with other IT security measures. The estimated cost to the Government of switching contractors is in the range of $1.0M USD per each occurrence (Ref: Estimated Cost to the Government, below). OCC CHAMPVA VistA is an outdated difficult to re-program system. Based on the new vendor conversion data from 2008, it takes eight (8) full time VHA employees for a period of six (6) months to get the system re-programmed to be used by a new contractor. Examples of the programing tasks involved are a) accepting batch files from a contractor based on the contractor s Tax Identification Number (TIN) in a manner that ensures proper claim entry in VistA system and accurate routing via nightly payment batch to Austin, TX, b) certifying acurate coding for calculations of claims, cost share, catastrophic cap, and deductible, c) testing each batch file including claims and reversals to ensure proper entry of the VistA system, correct adjudication, and return of proper files, d) ensuring proper transfer via external network of medication coverage and medication approvals information, e) and subsequent programming by the contractor of its system to accept OCC proprietary batch files including eligibility, claim acceptance, and payment response. The estimated XXXXXXX in duplication of costs that the Government does not expect to recover through competition is derived as follows: XXXXXXXXXXXXXX The significant cost and time to transition to a new contractor and potential costs of disrupted operations limits the ability of VFMP to compete the PBM requirement annually. Status of Technical Data Packages, Specifications, Engineering Descriptions, Statements of Work, or Purchase Descriptions Suitable for Full and Open Competition VFMP is in the process of modernizing the claims processing system. The old VistA system is being phased out to allow more timely claims processing on the Facets (ClaimsXM) platform. Due to strategic business decisions, the timeline for a full ClaimsXM implementation was moved from Spring 2021 to Summer 2021, and recently to the end of the 2022 calendar year. In 03/2022 a decision was made that the Financial Management Services (FMS) would no longer process the Camp Lejeune Family Member Program (CLFMP) PBM claims and the CLFMP claims processing requirement would be added to the VFMP requirement. As CLFMP PBM claims processing is done manually and the legacy system processes pharmacy claims in a proprietary format instead of a standardized format, VFMP is running into issues matching up data from the proprietary format. Regardless, an effort is underway to add CLFMP claims to the new automated processing system by the end of the 2022 calendar year. The solicitation package is being revised to include all ClaimsXM pharmacy system and CLFMP requirements. Listing of Sources that Expressed, in Writing, an Interest in the Acquisition: Market research conducted by IVC indicates that there are three companies with the capability and capacity to meet the minimum needs of the agency. Those companies are the incumbent (OptumRx), ExpressScripts, and Wellmark. Data obtained during Industry Day in 2022 indicates that the following companies are likely to compete to provide PBM services: ExpressScripts, OptumRx, Health Plan Data Solutions, and possibly Walgreens and JP Morgan. However, new vendors would not be able to obtain the authority to operate in the short time the agency has to ensure services are not lost. There are other companies as well, but those companies operate on a more regional basis and are not known to be national PBM contractors with as extensive network as required to meet the minimum needs of the agency. A Statement of the Actions, if any, the Agency May Take to Remove or Overcome any Barriers to Competition before any subsequent acquisition for the supplies or services required: The contracting officer is working with IVC to develop a new PBM requirement, which will be competed on a full and open basis. Based on proposed changes to the program, an integrated product team (IPT) has been stood up and is in the process of drafting a new performance work statement, acquisition plan, independent government cost estimate, and market research report to support the new solicitation. It is estimated that the solicitation will be issued in January 2023 with a targeted award date in February 2023. Requirements Certification: I certify that the requirement outlined in this justification is a Bona Fide Need of the Department of Veterans Affairs and that the supporting data under my cognizance, which are included in the justification, are accurate and complete to the best of my knowledge and belief. XXXXXXXXX Approvals: XXXXXXX Concur: XXXXXXX NAC HCA Review and Approval: I have reviewed the foregoing justification and find it to be complete and accurate to the best of my knowledge and belief and approve ($750K to $75 million) for other than full and open competition. XXXXXXXXX