HFS B41734 PBMS SEFS 022124.pdf

Sole Source Justification Form

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

Sole Source Justification Form - Part I Section I - General Information

Department/Bureau/Section: Division of Medical Programs/Bureau of Professional & Ancillary Services/Pharmacy

Need Identified Date: Sep 5, 2023 Supply/Service Need By Date: 3/17/2024

Project Title: Pharmacy Benefit Management System (PBMS) Sole Economically Feasible Source

Vendor: Change Healthcare Pharmacy Solutions, Inc.

Provide a description of the supplies or services required:

Healthcare and Family Services (HFS) requires a Pharmacy Benefit Management System (PBMS) to support its Pharmacy Service Programs. HFS administers the Medical Assistance Program for the State of Illinois, a $37.65 billion per year program that serves approximately 3.9 million customers through over 133 ,000 providers. HFS processes over 1 million Fee-for-Service (FFS) claims per year and 2.6 million Managed Care Organization(MCO) encounter claims and oversees the administration of federally mandated Title XIX (Medicaid) and Title XXI (CHIP) programs. HFS is requesting a Sole Economically Feasible Source (SEFS) contract in order to secure continued operations under our current PBMS to ensure continuity of medical and pharmaceutical care for the State's Medicaid population, to meet our statutory billing requirements and to continue collection of $2.4 Billion in rebates to provide funding for the State’s Medicaid program(s).

Value: Estimated Value of Initial Term, this Change Order or Amendment: 5,357,822.75

Will this Sole Source amend a Professional or Artistic Services contract? Yes No

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Type: New Sole Economically Feasible Source

Section II - Proposed Term

One-Time Purchase Term Contract

Estimated Contract Begin Date: Mar 17, 2024

Estimated Contract End Date: Mar 16, 2025

Number of Potential Renewals: 0

Length of Each Renewal in Months: 0

Total Value of All Renewals: 0

If a Term Contract, does the term, including renewals, exceed 12 months? Yes No

Section III - Funding Source Select the type of funding to be used (Check all that apply): State Appropriate Funds Federal Funds Other (Explain):

Section IV - Sole Source Justification

This purchase is economically only available from a single source primarily because it is: (If "Other" explain in one sentence)

Items are Copyrighted or Patented and the Items are Only Available from the Holder

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

Are there secondary justification(s) for this sole source? Yes No

Another justification that this purchase is only available from a sole source is because it is:

Significant Loss of Funding / The drug rebate management system generates $2.4 Billion annually in rebates.

Another justification that this purchase is only available from a sole source is because it is:

Critical Needs Remain from Previous Contract Which Only This Vendor Can Provide due to unique requirements.

Section V - Purchase History

Has the Agency or University Purchased these supplies or services in the past? Yes No

Term Term From Term To Value Description Contract Number Type

1 03/17/2014 3/16/2019 28,571,859.46 Goold Systems Contract 2012-62-006 RFP

2 08/22/2014 03/16/2019 0 Name Change/Location Change 2012-62-006KA1 Amendment

3 02/25/2015 03/16/2019 0 Numerous Section Clarifications 2012-62-006KA2 Amendment

4 09/18/2018 03/16/2019 0 Corporate Name Change/Numerous Section Clarifications 2012-62-006KA3 Amendment

5 03/17/2019 03/16/2024 34,444,132.57 Contract Renewal 2012-62-006KR1 Renewal

If more than 10, or if other comments, explain:

Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

HFS relies on the annual revenue of $2.4 billion (approximately $200 million per month) generated by the Drug Rebate program through collected rebates, which is crucial to funding many of the State's Medicaid programs. The Agency requires a vendor to provide claims reimbursement to receive payment for the appropriate state and federal rebate amounts. This process ensures that customers can access all necessary life-saving medications, maintenance medications, over-the-counter drugs, and vaccines. To meet these requirements, HFS needs a Pharmacy Benefit Management System (PBMS) to process and adjudicate pharmacy claims, complying with Federal Regulations, Illinois Statutes, associated Illinois Administrative Rules, and policies set by State and Federal Governments.

Pharmacies also rely on this PBMS to submit pharmacy claims for payment. The PBMS facilitates prior authorizations, which are essential for the health and safety of approximately 3.9 million Illinois Medicaid customers. The PBMS enables the management of a Preferred Drug List (PDL), which would not be enforceable without a functional PBMS to monitor and edit claims. The current system interfaces with the provider enrollment system, eligibility systems, and the legacy MMIS system. Additionally, technical services are necessary during the contract to allow for programmatic changes/additions which may arise during the contract period and to ensure a smooth transition of data to a newly awarded Vendor.

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

2. Provide a list and describe in detail the specifications required to satisfy the need:

The provided services encompass a comprehensive Pharmacy Benefit Management System (PBMS) for Illinois, catering to various aspects of pharmaceutical services administration. Key functionalities include secure portals for administrative access, real-time access to claims data and formulary information, management of drug coverage status and preferred drug lists, prior authorization facilitation, decision support systems, workflow automation, and claims processing. Additionally, the system supports rebate management, coordination of benefits, cost avoidance, dispute resolution, and infrastructure and technical support. It ensures compliance with audit frameworks and provides hosting services with disaster recovery capabilities. The below list outlines the various services to be provided:

- A secure Pharmacy Benefit Management (PBM) Portal for accessing applications, summary information, and user management.

- RxPortal for real-time access to claims data and drug information.

- Formulary Application for managing drug coverage status and data feeds.

- Illinois Pass Through Attributes Formulary for managing preferred drug lists and generating analytics reports.

- Preferred Drug List (PDL) Management System for indicating preferred drug status and managing drug lists.

- Prior Authorization Decision Support System (PADSS) for facilitating clinical review and processing of prior authorizations.

- Decision Support System (DSS) for running queries against pharmacy Medicaid datasets.

- Illinois Provider Portal for accessing participant information and submitting prior authorization requests.

- DeepSee Analyzer for support of the creating pivot tables based on aggregated data.

- SQL Server Reporting Services (SSRS) Report Manager for accessing and managing reports.

- Retrospective Drug Utilization Review (RetroDUR) for managing documents and provider inquiries.

- Drug Rebate Program management including a Drug Rebate Management System (DRM).

- Workflow Automation for guiding users through business activities.

- Rules Engine Configurability for responding to changes in the business environment.

- Web-Based User Interface for standardized communication with providers.

- Claims Processing for maintaining reference data.

- Point of Sale (POS) Claims Adjudication for real-time adjudication of pharmacy claims.

- Claims Payment Processing for aggregating and processing adjudicated claims.

- Prior Authorization support for processing authorization requests.

- State Pharmaceutical Assistance Program (SPAP) implementation and rebate adjudication.

- Cost Avoidance for enhancing coordination of benefits.

- Formulary and Rates Maintenance for managing drug formularies.

- Drug Data File provision.

- Manufacturer Payment Processing for managing payments.

- Dispute Resolution Process for handling payment disputes.

- State Maximum Allowable Cost (SMAC) list management.

- Infrastructure and Technical Support for hosting and maintaining the system.

- Pharmacy Claims Exchange Switch for real-time data exchange.

- PBMS Hosting Services for on-premises hosting and disaster recovery.

- Audit Compliancy for adhering to audit frameworks.

-Contract Transition and Close Out.

These services collectively aim to support the efficient management of pharmacy benefits and related processes for the state's healthcare program. See attachment for a detailed list of required specifications for this one year SEFS contract.

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

The current PBMS is a proprietary system which was awarded to Change Healthcare Pharmacy Solutions, Inc. through the Request for Proposal process. The Vendor has provided extensive programming to include addition of unique edits and overrides to accommodate the specific business rules and policies for the State of Illinois. Some examples include the 4-Script Rejection edit, which allows clinical pharmacists to review for medical necessity, edits related to 340B discounted drugs, which are identified at the claims level instead of the provider level and are unique to the State of Illinois. Additionally, there are state-specific pricing logic that are built into the system.

This PBMS has an excess of 100 features all of each meticulously programmed, the PBMS ensures that pharmacy operations align with the requirements of Federal Regulations, Illinois State Laws, associated Administrative Rules, and policies unique to Illinois Medicaid, all while prioritizing appropriate customer care. Meeting these requirements within the timeframe cannot be addressed by any other product or vendor.

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

Over the past decade, the current Vendor, Change Healthcare Pharmacy Solutions, Inc., has dedicated programming and adapting their system to meet the needs of the Illinois Medicaid Program, including the eligibility hierarchy, different formularies for eligibility groups, and all edits and available overrides necessary for the system to function properly. The Vendor has provided extensive programming to include the addition of unique edits and overrides to accommodate the specific business rules and policies for the State of Illinois.

Change Healthcare has adapted to the unique and numerous specific needs of HFS to ensure accurate payment of pharmacy claims while also ensuring that the customer's health needs are at the forefront. Investments in the current PBMS include years and $3.1 million in DDI costs and have been successful in obtaining programming that is streamlined and able to successfully adjudicate claims according to federal regulations, state statutes, and associated administrative rules and policies unique to the Illinois Medicaid Assistance Program.

A new Vendor would require their extensive configuration, programming time, and costs in order to establish their viability as processors for State of Illinois claims. Costs associated with a new vendor could include DDI expenses in excess of $3.1 million, which have been paid to the current Vendor. A Commercial Off the Shelf (COTS) product cannot be used without significant investment to complete modifications to ensure compliance with Federal Regulations, Illinois State laws and associated Administrative Rules, and policies unique to the Illinois Medical Assistance Program also. A new PBMS or COTS cannot be implemented or operational by the end of the current Vendor’s contract. Prior to Change Health Pharmacy Solutions, Inc., HFS ran the Pharmacy Benefit program "in-house", therefore, there are no other Vendors that could provide a viable PBMS for the State of Illinois within the time frame required.

5. Has the Agency or University considered alternative supplies or services to satisfy their need? Yes No

5a. If yes, name the alternative vendors whose supplies or services were evaluated:

HFS is currently in the process of drafting a Request for Proposal (RFP) to replace the existing PBMS contract. The new contract will not be awarded or put in place before the current contract expires on March 16, 2024. The new RFP is expected to be released in 2024.

Given the unique requirements of the pharmacy program and the complexity involved, it is not practical for a new Vendor to become fully operational within the limited time remaining on the current contract. The time constraints do not allow sufficient time for a new Vendor to design, develop, and implement a program that aligns with the agency's specific needs before this current contract ends.

5b. If yes, what were the alternatives for each vendor and why were they unacceptable? Be specific with regard to features, characteristics, requirements, capabilities and compatibility:

The new RFP is expected to be released in 2024.

5c. Explain how the market evaluation was conducted?

*This evaluation is to determine available options within a market. If the evaluation is to determine quality or best suited option, this is not the appropriate source selection. Under no circumstances shall the evaluation consist of testing alternative options. These activities must be conducted in a competitive transparent environment (i.e. IFB or RFP).

HFS is seeking a sole economically feasible contract with Change Healthcare Pharmacy Solutions, Inc. to provide transition services until a competitive procurement can be completed and awarded.

6. Are there resellers or distributors?

Yes No N/A

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

Current services were competitively procured through the Request for Proposal (RFP) Process in 2012. The contract was awarded to the most responsive and responsible offerer at a fair and reasonable price. This is a transactional based contract, meaning, many of the costs are subscription, annual and per transaction rate (fluctuates based upon number of transactions), it contains very little “services” and the rates would remain firm for the term of the SEFS contract. There are multiple approaches to Pharmacy Benefit Programs, therefore, it is difficult to compare pricing amongst the States. Some States offer Pharmacy Benefit Managers/Administrators which run the entire program, including drug rebate, some States offer Pharmacy Benefit Services which are not inclusive of drug rebate, and other States have Pharmacy Benefit Systems with/without drug rebate. The State of Illinois provides a Pharmacy Benefit System w/a partial drug rebate solution, which is unique from other States.

The pricing consists of the following: a slight increase (5%) in the cost of subscriptions; no increase to the exchange switch cost; a moderate increase in Operational costs and Hosting services, due to the age of the system and the hosting requirements which need to be maintained until a new solution can be procured; a moderate increase to the technical services hourly rates, which have brought into alignment with current rates in the marketplace for similar services, which can vary from $200-$375+ per hour (as shown on the following: https://consultingmavericks.com/start/other/average-consulting-rates-by-industry/)

HFS has consulted with and reviewed other States' Pharmacy Benefit programs and are confident that the pricing obtained is both fair and reasonable.

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

Yes No

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

The absence of the current PBMS vendor to bridge this gap would result in a catastrophic failure of HFS' ability to process and adjudicate pharmacy claims. This would have dire consequences for over 3.9 million Illinois Medicaid customers, as they would be unable to access essential medications, maintenance drugs, over-the-counter medicines, or vaccines, putting their health, life and safety at significant risk. Furthermore, pharmacies would be unable to submit pharmacy claims for payment. The impact on life and health, combined with the long-term ramifications of a failed PBMS, cannot be underestimated. The State of Illinois Medicaid program primarily serves the most vulnerable citizens of the state, and depriving them of access to healthcare could lead to severe illnesses, injuries, and even fatalities. The absence of a functional PBMS not only endangers the Pharmacy program and its beneficiaries but also directly impacts the funding of various other programs within HFS. The Drug Rebate program alone generates over $2.4 billion ($200 million monthly) in revenue, which plays a crucial role in funding the state's Medicaid programs. Additionally, there is a need for transition services to migrate historical data from the current system to the new one and to facilitate the closure of the existing contract. Support services with the current file formats will be essential to bridge the gap between the current contract and the contract with the newly procured vendor.

10. Is there any additional information you would like to add to justify this sole source?

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

Section VII

Requesting Department Representative

Requesting Department Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

Date Feb 21, 2024

Printed Name Jose Jimenez E-mail Address jose.jimenez@illinois.gov

Phone Number 217-299-3941

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed)

E-mail Address Devin.McQuillan@illinois.gov

Phone Number 217-558-3059 Date Feb 21, 2024

Printed Name Devin McQuillan

Agency Bureau/Division Head or University Purchasing Director and Not a Designee

SPO Approval and Signature Required

I have reviewed and understand the contents of this Sole Source Justification and agree with the State Agency or University determination.

I have reviewed and understand the contents of this Sole Source Justification and do not agree with the State Agency or University determination. As a result, the State Agency or University must explore other sourcing methods to satisfy their need.

State Purchasing Officer Signature Phone Number 217-993-1719 Date 2/21/2024

Printed Name Jennifer Klein E-mail Address jennifer.klein@illinois.gov

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Bulletin Reference Number 24-478HFS-MEDPR-B-41734

Requesting Agency/University Healthcare and Family Services

Sole Source Justification Form - Part II Section I - General Information

Project Title Pharmacy Benefit Management System (PBMS) Sole Economical Feasible Source

Vendor Change Healthcare Pharmacy Solutions, Inc.

Initial Date of Procurement Bulletin Posting 2/21/2024

Was a Sole Source hearing held per 30 ILCS 500/20-25?

Yes - Complete Section II and III below (Section II will only be visible when this option is selected)

No - Section II not required, go to Section III below Section III - CPO Approval and Signature Required

Based on my review, I authorize the Agency/University to proceed in accordance with the published Notice referenced above.

Based upon my review, I authorize the Agency/University to proceed with the following Changes.

Based on my review, the Agency/University is not authorized to proceed with this sole source as presented and my recommendation is that it be cancelled.

Other

CPO Signature CPO Phone 217-558-6897

Printed Name Ellen H. Daley Date

CPO E-mail ellen.h.daley@illinois.gov

Version 7.01 Page of Sole Source Justification Form - Part I Section I - General Information Will this Sole Source amend a Professional or Artistic Services contract?

If yes, what was the original contract value?

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Section II - Proposed Term If a Term Contract, does the term, including renewals, exceed 12 months?

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

Section III - Funding Source Select the type of funding to be used (Check all that apply):

Section IV - Sole Source Justification Are there secondary justification(s) for this sole source?

Section V - Purchase History Has the Agency or University Purchased these supplies or services in the past?

Term Term From Term To Value Description Contract Number Type Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

2. Provide a list and describe in detail the specifications required to satisfy the need:

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

5. Has the Agency or University considered alternative supplies or services to satisfy their need?

5a. If yes, name the alternative vendors whose supplies or services were evaluated:

5b. If yes, what were the alternatives for each vendor and why were they unacceptable? Be specific with regard to features, characteristics, requirements, capabilities and compatibility:

5c. Explain how the market evaluation was conducted?

*This evaluation is to determine available options within a market. If the evaluation is to determine quality or best suited option, this is not the appropriate source selection. Under no circumstances shall the evaluation consist of testing alternative options. These activities must be conducted in a competitive transparent environment (i.e. IFB or RFP).

5a. If no, why weren't alternatives evaluated?

6. Are there resellers or distributors?

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

8a. If yes, please provide details regarding future obligations and/or needs:

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

10. Is there any additional information you would like to add to justify this sole source?

Section VII Requesting Department Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed) SPO Approval and Signature Required Sole Source Justification Form - Part II Section I - General Information Was a Sole Source hearing held per 30 ILCS 500/20-25?

Section II - Sole Source Hearing Details The State posted to the Illinois Procurement Bulletin a description of the State's need, the justification for the sole source decision, and information regarding the opportunity to submit comments and testify at a public hearing. Notice of the hearing was also posted outside of the hearing room 48 hours prior to the hearing.

The public hearing was conducted for the purpose of receiving testimony regarding the sole source determination. The Hearing Officer recommends the following:

The following relevant documents are attached:

Section III - CPO Approval and Signature Required 9.0.0.2.20101008.1.734229 ellen.h.daley@illinois.gov

- A secure Pharmacy Benefit Management (PBM) Portal for accessing applications, summary information, and user management.

- RxPortal for real-time access to claims data and drug information.

- Formulary Application for managing drug coverage status and data feeds.

- Illinois Pass Through Attributes Formulary for managing preferred drug lists and generating analytics reports.

- Preferred Drug List (PDL) Management System for indicating preferred drug status and managing drug lists.

- Prior Authorization Decision Support System (PADSS) for facilitating clinical review and processing of prior authorizations.

- Decision Support System (DSS) for running queries against pharmacy Medicaid datasets.

- Illinois Provider Portal for accessing participant information and submitting prior authorization requests.

- DeepSee Analyzer for support of the creating pivot tables based on aggregated data.

- SQL Server Reporting Services (SSRS) Report Manager for accessing and managing reports.

- Retrospective Drug Utilization Review (RetroDUR) for managing documents and provider inquiries.

- Drug Rebate Program management including a Drug Rebate Management System (DRM).

- Workflow Automation for guiding users through business activities.

- Rules Engine Configurability for responding to changes in the business environment.

- Web-Based User Interface for standardized communication with providers.

- Claims Processing for maintaining reference data.

- Point of Sale (POS) Claims Adjudication for real-time adjudication of pharmacy claims.

- Claims Payment Processing for aggregating and processing adjudicated claims.

- Prior Authorization support for processing authorization requests.

- State Pharmaceutical Assistance Program (SPAP) implementation and rebate adjudication.

- Cost Avoidance for enhancing coordination of benefits.

- Formulary and Rates Maintenance for managing drug formularies.

- Drug Data File provision.

- Manufacturer Payment Processing for managing payments.

- Dispute Resolution Process for handling payment disputes.

- State Maximum Allowable Cost (SMAC) list management.

- Infrastructure and Technical Support for hosting and maintaining the system.

- Pharmacy Claims Exchange Switch for real-time data exchange.

- PBMS Hosting Services for on-premises hosting and disaster recovery.

- Audit Compliancy for adhering to audit frameworks.

-Contract Transition and Close Out.

These services collectively aim to support the efficient management of pharmacy benefits and related processes for the state's healthcare program. See attachment for a detailed list of required specifications for this one year SEFS contract.

A new Vendor would require their extensive configuration, programming time, and costs in order to establish their viability as processors for State of Illinois claims. Costs associated with a new vendor could include DDI expenses in excess of $3.1 million, which have been paid to the current Vendor. A Commercial Off the Shelf (COTS) product cannot be used without significant investment to complete modifications to ensure compliance with Federal Regulations, Illinois State laws and associated Administrative Rules, and policies unique to the Illinois Medical Assistance Program also. A new PBMS or COTS cannot be implemented or operational by the end of the current Vendor’s contract. Prior to Change Health Pharmacy Solutions, Inc., HFS ran the Pharmacy Benefit program "in-house", therefore, there are no other Vendors that could provide a viable PBMS for the State of Illinois within the time frame required.

The pricing consists of the following: a slight increase (5%) in the cost of subscriptions; no increase to the exchange switch cost; a moderate increase in Operational costs and Hosting services, due to the age of the system and the hosting requirements which need to be maintained until a new solution can be procured; a moderate increase to the technical services hourly rates, which have brought into alignment with current rates in the marketplace for similar services, which can vary from $200-$375+ per hour (as shown on the following: https://consultingmavericks.com/start/other/average-consulting-rates-by-industry/)

HFS has consulted with and reviewed other States' Pharmacy Benefit programs and are confident that the pricing obtained is both fair and reasonable.