Staff report
TheStatehouseFile.com

INDIANAPOLIS – The Indiana attorney general’s office has recovered more than $181,000 for the Indiana Medicaid program by joining with other states and the federal government in a fraud settlement with the drug manufacturer Organon.

The combined settlement – which resulted two whistleblower lawsuits – resolves allegations that Organon underpaid rebates to the state, offered improper financial incentives to nursing home pharmacies, promoted two of its antidepressants for unapproved uses and misrepresented its drug prices to the Indiana Medicaid program to reap larger margins and increased sales.

Organon was headquartered in the Netherlands and the company’s assets now are owned by Merck.

“Taxpayers are the victims whenever a drug company causes false claims to be submitted to Indiana Medicaid for its products,” Indiana Attorney General Greg Zoeller said in a statement. “Settlements resulting from whistleblower lawsuits are among the tools my office uses with our counterparts in other states to recover overpayments for false claims and restore funds to the Medicaid program so they can be put to their appropriate use.”

The attorney general’s Medicaid fraud control unit participated in the multistate and federal investigation.

Organon will pay $31 million to settle the lawsuits with the states and the federal government. Of that, Indiana Medicaid will receive $162,346 in a settlement arising from a whistleblower lawsuit filed in Massachusetts and $19,016 in a settlement arising from another whistleblower suit filed in Texas, for a total recovery of $181,362 to Indiana Medicaid.

The public can report fraud against the Indiana Medicaid program by contacting the Medicaid fraud control unit at 800-382-1039. More information about whistleblower lawsuits is at http://www.in.gov/attorneygeneral/2807.htm.

Kathleen McLaughlin for www.theindianalawyer.com

Three teams competing to partner with Indianapolis on a half-billion-dollar criminal justice complex shaped the city’s specifications in closed-door meetings.

Mayor Greg Ballard’s administration provided a draft of the city’s request for proposals to the bidding teams in April. But officials refused to share any version of the RFP with the public until Friday, when the city posted some of the document online but redacted key financial details including the project’s actual cost.

Changes to the RFP were made in private, contrary to typical government procurement, where comments and questions of bidders and the government’s subsequent amendments to its specifications are in full view. It isn’t clear what changes have been made at the request of bidders since the city still has not released the first draft of the RFP.

The industry preview is designed so that bidders may comment on the RFP, which outlines the city’s expectations for the financing, design, construction, operation and maintenance of a new jail and courts.

State Rep. Terri Austin thinks P3 deals need more transparency.

Proponents say the closed-door process leads to a better public-private partnership, or P3. Critics say it conflicts with Indiana’s public access and procurement law, and secrecy benefits only the private-sector partner.

One of Ballard’s deputies acknowledged that the procurement process caters to the bidders.

“There are completely proprietary questions these folks will not have discussions about in public,” Deputy Mayor for Economic Development Adam Collins told a committee of the City-County Council in September. “They have no desire to have their questions seen and answered by other technical groups they’re competing with.”

Experts on P3s say secrecy in the procurement process is not necessary. Nevertheless, it is common.

Wendell Lawther, a University of Central Florida professor who studied best practices for P3s, said a lack of transparency bothers him because there’s evidence to suggest the deals are more expensive to government in the long run.

The added expense may be a justifiable trade-off for delivering projects sooner and with few hiccups, Lawther said. “What I’m concerned about is whether or not we’re getting charged too much. What is the profit rate?”

Secretive reputation

Although laws vary from state to state, RFPs are typically released to the public, along with any questions posed by the bidders and subsequent amendments.

There’s no need to set up a parallel, more secretive process for P3s, said Josh Levy, who represents multiple construction firms from the Miami office of New York-based law firm Peckar & Abramson. “What’s unique about P3 is the characteristic of the project itself and the risk that’s shifted from the public sector to the private sector.”

Florida in 2013 passed a law allowing local government entities to sign public-private partnerships for any type of building, from a recreation center to a jail, and to act on unsolicited private-sector offers.

Florida now has one of the most industry-friendly P3 laws in the country, Levy said. The construction industry wants to shield unsolicited proposals from Florida’s equally strong Sunshine Law governing public records, he said, but he has no objection to making RFP documents available to the public.

Elsewhere, P3s have gained a reputation as opaque.

Canada’s federal government encourages the use of P3s for everything from major transportation projects to school buildings. Government-sector unions and left-wing watchdogs are scrutinizing those deals, and the lack of transparency is one of their chief criticisms.

The city of Edmonton, Alberta, seemed to break the mold by making public earlier this month portions of the RFP for the Valley Line light rail. In most P3s, the RFP is kept secret, said Bill Moore-Kilgannon, executive director of Public Interest Alberta.

Moore-Kilgannon hoped that he would be able to see whether the city included in the RFP promises that were made to businesses and communities along the light-rail route about construction deadlines. He was disappointed when 100 pages of the 230-page document were redacted.

“All the pages redacted are really the specifics the community wanted to see,” Moore-Kilgannon said. “There’s no way for the broader public to hold these organizations accountable if we can’t see the details of what they’ve been told.”

Closed-door procurement

Ballard’s team is following the example of the Indiana Department of Transportation and Indiana Finance Authority in its lease of the Indiana Toll Road and construction of the I-69 extension and Illiana Expressway, Collins told the City-County Council.

The city issued a request for qualifications, or RFQ, that drew responses from five teams made up of local and international firms. The list of qualified bidders was narrowed to three.

When INDOT uses a request for qualifications to narrow the list of bidders, the agency’s policy is that “a public notice is not necessary before issuing the draft RFP to short-listed proposers.”

INDOT calls the closed-door procurement phase “industry review.” “During this time the INDOT/IFA hold meetings with the short-listed proposers to get feedback and provide clarification on the terms of the RFP,” Sarah Rubin, deputy director of the P3 division at INDOT, wrote in an email.

“It is a confidential period during which the content of the final RFP is developed,” Rubin said.

INDOT spokesman Will Wingfield said the agency believes the draft RFP need not be published because it’s still in development.

The state’s process seems to conflict with recommendations from the Federal Highway Administration.

The FHWA offers an example of a procurement process similar to one followed in Indiana, where qualified bidders are selected before issuing an RFP. The federal government makes no mention, however, of issuing a draft RFP behind closed doors for “industry review.”

The FHWA declined to comment on Indiana’s process.

transparency-facts.gif“What has developed here in Indiana could probably be given a second and third look to see if there are things we can do to increase public confidence and increase the transparency through which these deals are made,” said state Rep. Terri Austin, D-Anderson.

Austin, who co-chaired a task force on P3s in transportation for the National Conference of State Legislatures, believes the deals are more transparent in other countries.

“What they do is make the case that it is the most expedient and efficient … way to do a project over traditional procurement methods. They have to make the case in dollars,” Austin said.

Defending secrecy

Indianapolis officials discuss in broad terms what they’re seeking from the three bidding teams.

Director of Enterprise Development David Rosenberg, who is leading the administration’s work on the justice center, said the city wants the private-sector partner to finance, design and build a new jail and courts, then operate and maintain the buildings for 30 years in exchange for a set fee.

The maximum fee, or “availability payment” will not exceed what the city and county currently budget for criminal court and jail expenses, he said.

Rosenberg has said the availability payment is stated in the RFP, but he won’t disclose the number. In a July interview, he said the secrecy was necessary to maintain competitive tension among the three bidders and produce the best deal possible.

Lawther, the Florida professor, said, “I think that’s crap, frankly.”

Lawther recently led a team that studied best practices in transportation P3s on behalf of the Florida Department of Transportation. That state’s DOT has made its draft RFPs public, he said, and it didn’t derail any deals.

In a rare example of information sharing, Lawther said California released the so-called “value-for-money” analysis of its Presidio Parkway project. Legislative analysts later determined that the assumed discount rate was too high, making the billion-dollar project appear less expensive than traditional procurement.

The discount rate is an interest rate used in cash-flow analysis to determine the present value of future cash.

“That’s a complex kind of issue,” Lawther said. “There’s no agreement about what an appropriate discount rate should be. I think there should be some dialogue on this issue.”

Bucking state advice

Indianapolis is going against the advice of state Public Access Counselor Luke Britt in refusing to disclose the RFP. The city’s Office of Corporation Counsel says the document is the subject of negotiations, and that it contains trade secrets.

Britt questioned the validity of those arguments in a September letter to the city and IBJ, which has filed a complaint. The city reiterated its denial on Sept. 30 but said it intends to release all documents once the RFP is final.

Documents the city released Oct. 17 describe a justice center with four interconnected buildings totaling 1.2 million square feet. The plans call for almost 4,000 beds for prisoners, 10 hearing rooms, 27 courtrooms and about 2,200 parking spaces. But the city declined to release financial details.

Marc Lotter, a city spokesman, did not immediately respond to a follow-up request by IBJ for a copy of the original RFP document.

If the record is public, then drafts of that record should also be available to the public at the time they’re created, said Steve Key, executive director of the Hoosier State Press Association.

The notion that an RFP would contain trade secrets, as Indianapolis states, is “ridiculous,” Key said.

“How could you have a trade secret on something you’re asking people to bid on,” he said.

Indianapolis isn’t the only government advancing that argument. Moore-Kilgannon said most of the time, Canadian governments claim trade secrets are the reason RFPs must be kept under wraps.

“Usually, they would use language like, ‘There’s propriety information in there,’” he said. “The problem is the scope of the project is often reduced through that process, but the public can’t see.”•

Editor’s Note: A version of this story appears in the Oct. 20 print edition of IBJ. The story has been updated to reflect the city’s release of some RFP documents after the newspaper’s deadline.