West Virginia's state health agency and Attorney General Patrick Morrisey have approved a $657,000-a-year contract with a drug company that both offices are suing for allegedly fueling the state's opioid epidemic.
The Department of Health and Human Resources selected Cardinal Health to manage the pharmacy at Welch Community Hospital in McDowell County, even though Cardinal initially wasn't the low bidder on the state contract.
Morrisey's office held up the contract for three months, but signed off on the deal in late May after being pressed by state Health Secretary Karen Bowling. In a letter, Morrisey's chief deputy told Bowling that the office's role was to ensure Cardinal Health's contract was in "proper form" - nothing more.
Delegate Isaac Sponaugle, D-Pendleton, said the state shouldn't be inking contracts with drug companies that DHHR and the attorney general have accused of wrongdoing.
"Their approval of this drug contract with Cardinal Health undermines the state's case," said Sponaugle, who also works as a lawyer in Franklin. "Cardinal Health has been driven out from other states for pill dumping. Signing this contract may be sabotaging the state's lawsuit against an alleged prescription drug kingpin."
Morrisey's deputies have OK'd more than 4,000 state contracts. Never before had Morrisey's office sent a letter to a state agency official explaining its reasons for approving a contract, according to the state Purchasing Division.
Before taking office in 2013, Morrisey represented Cardinal Health as a lawyer and lobbied for a drug company trade group on Cardinal's behalf, Morrisey acknowledged during an ethics investigation last year. Morrisey's wife, Denise Henry, lobbies for Cardinal Health in Washington, D.C. Cardinal has paid Henry's lobbying firm, Capitol Counsel, $1.4 million since Morrisey became attorney general, according to lobbying disclosure reports.
Morrisey inherited the state's lawsuit against Cardinal Health from the man he ousted, former Attorney General Darrell McGraw. McGraw filed suit against the drug giant in July 2012, alleging the company shipped an excessive number of painkillers to "pill mill" pharmacies across West Virginia. The case is scheduled to go to trial later this year.
Morrisey's office declined to say whether the contract might jeopardize the lawsuit.
"Our office does not discuss its litigation strategies or evaluations in the press," said Curtis Johnson, Morrisey's spokesman.
In December 2015, DHHR officials solicited bids to manage the state-owned hospital in Welch. The existing contract was set to expire. Cardinal Health subsidiaries had run the Welch hospital pharmacy since 1993, according to DHHR.
DHHR received two bids for the new contract - from Cardinal Health and from Pharmacy Systems Inc. Both companies are headquartered in Dublin, Ohio.
Cardinal Health offered to manage the Welch hospital pharmacy for $657,878 a year. Pharmacy System's bid was $642,000 - $15,878 less than Cardinal's.
But DHHR designated Cardinal Health a preferred vendor at the company's request. Out-of-state companies like Cardinal qualify for "vendor preference," provided they have 100 or more employees working in West Virginia and at least 75 percent of those employed under the contract live in the state.
Cardinal submitted a list of 175 West Virginia residents on the company's payroll. Cardinal also notified DHHR that five of the six employees working for the Welch hospital pharmacy would be state residents.
Cardinal's contract manager initially balked at providing the names of cities in which their West Virginia-based employees live, but the company eventually did so after state officials warned Cardinal would lose its preferred vendor designation.
After classifying Cardinal Health as a preferred vendor, state officials, following standard protocol, upped competitor Pharmacy's Systems' bid by 2.5 percent or $16,050 a year. The result: Cardinal Health's bid was $75 less per year than Pharmacy Systems' on a $657,878 contract.
The state Purchasing Division approved Cardinal Health's contract on Feb. 19 and sent it to the Attorney General's Office for Morrisey's signature. And there the contract sat, for three months.
"Our office had questions, and it took until then to get the answers," Johnson said.
On May 18, Bowling sent a letter to Deputy Attorney General Bob Leslie, asking him to "immediately" review and approve the Cardinal Health contract "as to form" - that it meets all legal requirements. Bowling also cited a state law that requires the attorney general to sign off on state contracts.
Two days later, Leslie approved the contract - and sent a letter to Bowling explaining his reasons for doing so. Leslie wrote that his office's role in approving state agency contracts is "merely ministerial."
"The office has no veto power over those contacts, nor does this office have the legal authority to analyze the underlying transaction to determine if it is in the state's best interest," Leslie said in the letter.
Leslie added that DHHR's and Morrisey's ongoing lawsuit against Cardinal Health "raised concerns." But Leslie wrote that Bowling's chief lawyer had told him "there are limited options for the provision of these services for the hospital." There's no mention about Pharmacy Systems' bid in the correspondence between Leslie and Bowling.
Asked whether Morrisey's office knew the circumstances that led to Cardinal Health winning the contract, Johnson said: "Our office received the contract file. The contents speak for themselves."
DHHR gave final approval to Cardinal Health's contract on May 23.
Three weeks later, Morrisey's paralegal, Racquel Gray, asked the state Purchasing Division to include Bowling's and Leslie's letters in the official contract file.
"Mr. Leslie's letter was warranted," Johnson said. "The contract file was the proper location for Secretary Bowling's correspondence."
The state-operated Welch hospital is the only hospital in McDowell County, a place ravaged by prescription drug abuse. West Virginia has the highest drug overdose death rate in the nation, and McDowell County has the highest percentage of such deaths among the state's 55 counties.
Asked whether Cardinal Health's contract might undercut the state's lawsuit, DHHR spokeswoman Allison Adler said the company's hospital management service is distinct from its prescription drug business.
"Managing a hospital's pharmacy does not negate any distributor's responsibilities under the law to ensure appropriate distribution of prescription drugs," Adler said.
For more than two years, Morrisey insisted he stepped aside from the Cardinal Health lawsuit when he took office in January 2013. He later told the state's lawyer disciplinary board that he played a limited role in the case his first months in office and didn't establish a "permanent screen" from the lawsuit until July 2013, after the Gazette-Mail reported on his ties to Cardinal Health. Morrisey has turned the case over to his deputies.
The lawyer board dismissed a complaint against Morrisey that alleged he had an "incurable conflict of interest" with the lawsuit against Cardinal Health and a separate case against a dozen other drug wholesalers.
Reach Eric Eyre at ericeyre@wvgazettemail.com, 304-348-4869 or follow @ericeyre on Twitter.