Arkray USA, Inc. v. United States

117 Fed. Cl. 22, 2014 U.S. Claims LEXIS 570, 2014 WL 2903399
United States Court of Federal Claims·Decided June 26, 2014·No. 1:14-cv-00233·Published·Cited by 2 cases

Opinion

Bid Protest; Federal Supply Schedule; Uniform Formulary; 28 U.S.C. § 1491(a)(2), Remand

OPINION

NANCY B. FIRESTONE, Judge

In this post-award bid protest case, AR-KRAY USA, Inc. (“plaintiff’ or “ARKRAY”), challenges the Defense Health Agency’s (“DHA” or “the agency”) selection of Abbott Diabetes Care Sales Corporation’s (“ADCSC” or “defendant-intervenor”) self-monitoring blood glucose system (“SMBGS”) test strips (“strips”) for the TRICARE uniform formulary (“UF”), 1 and its establishment of a blanket purchase agreement (“BPA”) with ADCSC for the purchase of the strips.

Pending before the court are the parties’ cross-motions for judgment on the administrative record (“AR”) under Rule 52.1 of the Rules of the United States Court of Federal Claims (“RCFC”) and plaintiffs motion for a permanent injunction. Plaintiff largely argues that the award to ADCSC was improper for two reasons. First, plaintiff contends' that ADCSC was not eligible to receive a BPA because, as explained infra, ADCSC did not hold a Federal Supply Schedule (“FSS”) contract at the time it submitted its bid, as required by the solicitation. 2 Plaintiff separately contends that DHA, due to its alleged bias in favor of ADCSC, did not require ADCSC to have in place a process to supply patients with blood glucose meters that complied with the Trade Agreements Act (“TAA”), 3 as required by the solicitation. For the reasons explained below, the parties’ cross-motions are DENIED, the court STAYS consideration of plaintiffs motion for a permanent injunction, and the case is REMANDED to the DHA Contracting Officer for further proceedings consistent with this opinion.

1. BACKGROUND

a. Responsibilities and procedures related to establishing TRICARE BPAs

Before DHA executes a BPA with one or more companies for the acquisition of pharmaceutical agents, those pharmaceutical agents must be selected for inclusion in the TRICARE formulary. See AR 224. The government’s decision to include a pharmaceutical agent is based upon its relative clinical and cost-effectiveness, as determined by a Pharmaceutical and Therapeutics Committee (“P & T Committee”), which is composed of representatives of pharmacies of the uniformed services and other military healthcare providers. See 10 U.S.C § 1074g(b). Before final formulary decisions are made, a Beneficiary Advisory Panel (“BAP”), includ *24 ing representatives of beneficiaries, contractors, and providers, has an opportunity to comment on any proposed changes to the formulary. See 10 U.S.C. § 1074g(e). The DHA Director makes final formulary decisions, taking into account both the P & T Committee’s recommendations and the BAP’s comments. Id. §§ (a)(2)(A)-(D), (c); 32 C.F.R. § 199.21(g)(3).

Although the DHA Director makes final formulary decisions, the DHA Contracting Officer assigned UF BPA duties (“Contracting Officer”) is ultimately responsible for the solicitation, execution, and administration of the UF BPA(s). See AR 1816. FAR 8.405-3 identifies several factors that the Contracting Officer should consider when determining whether to establish a single-award BPA, including the administrative costs of BPAs, the scope and complexity of the requirements, and the benefits of on-going competition. See 48 C.F.R. § 8.405-3(a)(3)(iv).

In managing the solicitation, the Contracting Officer is tasked with coordinating and communicating with the DoD organizations that are responsible for reviewing the relative clinical effectiveness of the pharmaceutical agents under review, as well as the Department of Veterans Affairs (“VA”) FSS Service. See AR 1816. Prior to forwarding quotes to the P & T Committee for a cost effectiveness review, the Contracting Officer is responsible for conducting a review to ensure that the quotes are complete and comply with the posted instructions for submitting BPA quotes. See AR 1819-20 (Contracting Officer’s Statement of Facts describing requirements for establishing BPA). In this connection, the Contracting Officer compares quotes to the current FSS files available from the VA to ensure that (1) quotes are covered by the FSS contract identified in the quote, (2) the quoted FSS contract number and FSS contract holder have not changed, (3) the quoted prices do not exceed the lower of current FSS or “Big 4” pricing, 4 and (4) all open FSS administrative matters have been resolved. Id. In the event that a quote contains an irregularity “that inhibit[s] the contracting officer’s ability to accept the quote and execute a BPA,” that quote must be rejected unless the irregularity can be resolved prior to forwarding the quote to be evaluated for cost effectiveness. 5 See AR 1819. Once the bid has been reviewed and the DHA Director makes a final decision, the BPA(s) are executed. AR 1820.

For the twelve month period between March 2012 and February 2013, the TRI-CARE Pharmacy Benefit Program submitted $94.6 million of costs for 161.8 million test strips dispensed to approximately 325,000 eligible beneficiaries. See AR 255; Def.’s Opp’n to Pl.’s Mot. for a Prelim. Inj., Ex. 1 ¶¶ 4, 13(a) (Declaration of Lieutenant Colonel Robert C. Conrad), ECF No. 21. During this same period, five manufacturers ([...] Abbott; 6 and [...]) represented over [...]% of the total market share, with Abbott representing [...]% of the market share. AR 256. Once the formulary decision and new BPA is fully implemented, the agency estimates that it will reduce expenditures to $15 million for the first year. See Def.’s Opp’n to Pl.’s Mot. for a Prelim. Inj. Ex. 1 ¶ 13(a), ECF No. 21.

b. Solicitation criteria

On June 13, 2013, the agency posted a solicitation for glucose test strips on its website. See AR 200, 1821. Among other things, the solicitation contained a general template for submitting quotes, with specific requirements pertaining to the FSS and TAA See AR 116, 200, 223. As to the former, the solicitation states that offerors “must have an existing FSS Contract for any pharmaceutical agent(s) quoted in this UFB-PA at the time the quote is submitted, and at *25 the time the UFBPA is executed. All terms of [the] Company’s FSS Contract apply to this agreement.” AR 118, 225.

With regard to TAA-compliance, the BPA template provides:

Meters

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Arkray USA, Inc. v. United States, 117 Fed. Cl. 22, 2014 U.S. Claims LEXIS 570, 2014 WL 2903399 (uscfc 2014).

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