Detroit, Emergency Managers — November 4, 2013 at 7:05 am

The story of no-bid contracts under Detroit Emergency Mgr continues – CVS Caremark responds, Rep. Stallworth hits back


Cor·po·rat·ism (noun) – \ˈkȯr-p(ə-)rə-ˌti-zəm\ – The organization of a society into industrial and professional corporations serving as organs of political representation and exercising control over persons and activities within their jurisdiction.

[Caricature by DonkeyHotey from photos by Anne C. Savage for Eclectablog]

After I reported on NERD Fund donor CVS Caremark receiving a multi-million dollar prescription drug benefit contract with the City of Detroit and followed up with more HERE, MIRS News service picked up the story and did some further investigating. Friday night, they reported that Emergency Manager Kevyn Orr was moving forward with the $60 million contract approved by Detroit Mayor Dave Bing in 2012 despite an offer from Detroit firm ScriptGuideRX that would have saved the city $12 million.

That same day, I received an email from CVS Caremark’s senior director for public relations Christine Cramer saying that my post had “inaccuracies”:

Your blog post contains a number of inaccuracies, including the assertion that the awarding of the PBM contract by the City of Detroit was a no-bid process; the value of the contract, as stated, is also inflated and inaccurate.

As a pharmacy benefit manager, CVS Caremark is focused on providing our clients with opportunities to improve health outcomes for their members, while also managing costs. CVS Caremark offers our PBM clients tremendous value, transparency and cost-effective services. It is important to clarify that our agreement to provide pharmacy benefit management services to City of Detroit employees was a competitively bid contract that was evaluated by an outside consultant in an open and transparent process.

As to CVS Caremark’s political contributions, the amount contributed to this one particular fund has been publicly disclosed because CVS Caremark is committed to transparency around our political contributions. As a result of this commitment, we voluntarily disclose the identity of the recipients of our contributions and the amounts paid to each of them on our corporate web site.

Cramer is claiming that the bid was the result of a competitive bid process and that it was worth less than $60 million.

Since, according to her, it was part of a competitive bid process, I went to the City of Detroit website to see exactly what it was worth so that I could correct the information that I had received from Detroit Rep. Thomas Stallworth III’s press release. You can find all of the contracts signed by the city in 2012 and 2013 and by Kevyn Orr in 2013 HERE. At least I thought that was all of them.

In fact, the only contract listed for CVS Caremark was from 2012. In the 43-page spreadsheet from that year (pdf), CVS Caremark was listed as having received a contract “To Provide a Career Ladder Opportunity in Retail Management for Forty-Five (45) New Hires and Fifteen (15) Incumbent Workers”. The contract is for $104,555.00. There is no mention in any of the lists from either year of a prescription drug benefit contract for CVS Caremark or any other company for that matter.

I called Rep. Stallworth to see if he could explain things more fully. He told me that, once Kevyn Orr was installed as Detroit’s Emergency Manager, he began renegotiating a large number of contracts, including the one that CVS Caremark had been awarded, in order to “achieve greater cost savings, including for prescription drugs, for the city”.

“They were trying to pull that together and roll it out to save money and avoid as many benefit cuts as they could,” he told me. “During that process, they were adjusting benefits which were modified from the original contract. I learned about this from the lieutenants and sergeants in the police department. They told me that ScriptGuide had offered a proposal that would save a lot of money and had less cuts to the coverage.”

This modification of the original contract, Stallworth contends, essentially restarted the bidding process, such as it was. However, according to MIRS, ScriptGuideRX was never given an opportunity. Orr spokesperson Bill Nowling is quoted in their piece as saying that ScriptGuide couldn’t back up their claims. “We already got a contract in place. We are not going to tear it up just because someone ‘says’ they can save more,” Nowling told MIRS.

This is an odd thing to say, coming from the Emergency Manager’s office. It’s exactly what Public Act 436 empowers Emergency Managers to do. In fact, it wasn’t until the predecessor to PA 436, Public Act 4, which was passed in 2010 by a Republican-led legislature, that Emergency Managers were given this extra power, power which has been used numerous times to modify or even cancel labor contracts and others. It was a power given to Emergency Managers explicitly so that they could bypass normal negotiations and processes to achieve quick savings to the school or municipality. It was, in fact, the process Kevyn Orr was going through with the prescription benefits contract in question.

Furthermore, according to MIRS report, ScriptGuideRX has already proven itself in the state of Michigan. They received a contract three years ago to provide drugs to HIV-positive patients and those with AIDS, a contract they have had no problems fulfilling. In an ironic twist, the company they replaced when they received this contract was CVS Caremark.

I asked Rep. Stallworth why I was unable to find the CVS Caremark contract on the city website and why he thought they were being given what appears to be preferential treatment over a Detroit-based company.

“They’re supposed to post those contracts,” he told me. “Why not put them out in public? It’s serious lack of transparency.”

“Nobody’s challenging that negotiations were taking place,” Stallworth continued. “But there were serious conflicts of interest going on. You have Jones Day involved. Ernst Young. McMillin. Jones Day is Caremark’s outside council. Ernst Day is their outside auditor. McMillion is a business partner of CVS Caremark. All of these groups were connected to CVS Caremark as they were in the process of modifying the contract and then Caremark keeps the contract even when ScriptGuide offered a less expensive option, has fewer benefit cuts, and they are based in Detroit. It just doesn’t pass the smell test.”

I asked Rep. Stallworth if he holds CVS Caremark responsible in any way for what he described as a conflict of interest.

“No, I don’t blame Caremark,” he said. “This isn’t about them. This is about whether or not the citizens of Detroit got a raw deal. Despite the Emergency Managers’ powers, nobody expects them to do things where there is a conflict of interest. The fact is, nobody knew those relationships existed during the negotiations. It’s an abuse of power. Kevyn Orr is making decisions without any accountability.”

At the end of the day, this issue is, to me, not about whether or not CVS Caremark received preferential treatment either through their $1,000 contribution to the NERD Fund or through their business relationships with companies involved in modifying their original contract or not. Nobody is accusing them of not caring for their customers or of them not offering good value. I actually applaud their transparency in revealing their donation to the NERD Fund, even if it took an investigation by the Center for Public Integrity to reveal it. (I guess they didn’t want to brag too much about their $1,000 donation.)

Instead, the issue goes to the heart of the existence of the NERD Fund in the first place. Our government exists to serve the citizens of the state of Michigan and to ensure that their best interests are being addressed at every juncture and at all times. Any action that the government takes should be free from even the perception of outside influence that doesn’t serve our citizens’ best interests or it simply should not be done.

Governor Snyder has repeatedly said the NERD Fund existed for “offsetting costs of government” and to “promote charitable causes, including lessening the financial burdens of government in the state of Michigan”. It is my contention that actions taken by the state government should be, at all times, open and transparent. If the state government is doing something, we should not have private and, more importantly, secret entities funding it. It creates a tremendous opportunity for conflicts of interest and corruption.

Thanks to the Citizens United Supreme Court decision, we already have a serious perversion of our elections by wealthy individuals and vast corporate spending. Having these same wealthy people and businesses now funding part of our government operations is the final step into a complete corporatocracy where our lawmakers and leaders are chosen by corporations, our elections are funded by corporations, and the elected officials do the bidding of corporations. Rep. Stallworth is right: this isn’t about CVS Caremark. This is about Rick Snyder creating an open door for corporate influence in the operation of our government. He can claim, as he did to MIRS, that CVS Caremark is “not connected in any way, shape or form to the fund” but the existence of the NERD Fund will always make that questionable.

Which is exactly why the governor kept the donors secret.

So let’s not pretend that Governor Snyder and his cadre of corporate operatives weren’t aware that this was something they shouldn’t be doing. If they thought it was such a noble act, every donor would have been trumpeting their benevolence and Governor Snyder would have lauded the NERD Fund contributors, lavishing them with praise and banners and official state Certificates of Awesometude.

None of this was done. The Fund itself was hush hush. The donors were kept secret. And, when the inevitable hue and cry went up after the conflicts of interest came to light, the fund was shut down as quietly as possible with the donors’ identities still kept secret.

The NERD Fund should never have been formed in the first place. It goes against our American value of a government independent of corporate influence. To cross that line puts us on a slippery slope to corporatism. And it’s time for Governor Snyder to come clean about all of the donors so we can be absolutely certain that it wasn’t just a convenient place for corporations to make a deposit in the Snyder Bank of Pay to Play.

Adding… I’ve heard it suggested that we should rename the New Energy to Reinvest and Diversify (NERD) Fund the Never Ever Reveal Donors Fund. Yup. I think that fits perfectly.

Stallworth photo courtesy of Rep. Thomas Stallworth III