TITLE:   Novartis Pharmaceuticals Corporation; Parke-Davis--Costs, B-281681.8; B-281681.9, August 24, 1999
BNUMBER:  B-281681.8; B-281681.9
DATE:  August 24, 1999
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Novartis Pharmaceuticals Corporation; Parke-Davis--Costs, B-281681.8;
B-281681.9, August 24, 1999

Decision

Matter of: Novartis Pharmaceuticals Corporation; Parke-Davis--Costs

File: B-281681.8; B-281681.9

Date: August 24, 1999

Ronald K. Henry, Esq., and Mark A. Riordan, Esq., Kaye, Scholer, Fierman,
Hays & Handler; and David C. Hammond, Esq., and Mary Baroody Lowe, Esq.,
Powell, Goldstein, Frazer & Murphy, for the protesters.

Sharif T. Dawson, Esq., Defense Supply Center Philadelphia, Defense
Logistics Agency, for the agency.

Jeff Podraza, David A. Ashen, Esq., and John M. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

General Accounting Office will not recommend that protester be reimbursed
costs of filing and pursuing protest of alleged solicitation deficiencies
following agency corrective action, where protest arguments were not clearly
meritorious.

DECISION

Novartis Pharmaceuticals Corporation and Parke-Davis request that we
recommend that they be reimbursed the costs of filing and pursuing their
protests challenging the terms of solicitation SP0200-99-R-1502, issued by
the Defense Supply Center Philadelphia (DSCP), Defense Logistics Agency, for
HMG-CoA Reductase Inhibitors.

We deny the requests.

BACKGROUND

The solicitation, issued on October 23, 1998, contemplated the award of one
or two fixed-price national contracts for HMG-CoA Reductase Inhibitors
(cholesterol-lowering drugs, commonly referred to as statins) for use in the
Department of Defense's formulary programs and military treatment
facilities. The solicitation initially provided that proposals would be
evaluated based on two factors of equal importance, cost-efficacy and past
performance. (The solicitation provided for calculation of the cost-efficacy
of any particular statin through a mathematical formula that considers both
the drug's annual cost per patient and the efficacy of the statin in
lowering cholesterol.) In the event that proposals were rated essentially
equal after application of these two factors, the solicitation provided for
consideration of the effect of the statin on the incidence of fatal and
non-fatal myocardial infarctions (MIE); if the proposals then were still
essentially equal, the inconvenience of switching patients to the contracted
statins would be considered. RFP (Oct. 23, 1998) at 29-33. On December 1,
1998, DSCP issued amendment No. 0002 to the solicitation, which (1) elevated
MIE from its tie-breaker status to an evaluation factor, and (2) made the
technical factors significantly more important than cost. As amended, the
solicitation stated as follows:

Award will be made to the offeror(s) whose proposal contains the combination
of those criteria (set forth below) offering the best overall expected value
. . . . In aggregate, the technical factors are significantly more important
than cost or price. . . . In achieving this objective, the following
evaluation factors will be considered and are listed in descending order of
importance:

Cost-Efficacy

Evidence of effect on incidence of fatal and non-fatal myocardial

infarctions

Past Performance

RFP amend. No. 0002, at 29.

On December 9, Novartis protested to our Office that the solicitation as
amended was ambiguous as to the basis for award, unclear as to how the
agency would calculate MIE, and unduly restrictive of competition due to
limitations on the types of evidence of effectiveness the agency would
consider. DSCP amended the solicitation on December 16 (amendment No. 0006)
to (1) delete the statement that the technical factors would be
significantly more important than cost in the evaluation and to provide
instead simply that the factors are "listed in descending order of
importance," and (2) address the alleged ambiguity with respect to the MIE
calculation. [1]

On December 29 Parke-Davis, and on December 30 Novartis, protested that
competition was unreasonably restricted due to consideration of only MIE
under the second evaluation factor to the exclusion of other favorable
outcomes, and due to the definition of acceptable MIE evidence. DSCP amended
the solicitation on January 11 and January 14, 1999 (amendment Nos. 0007 and
0008) in an effort to respond to these protests. Finally, on February 11,
the agency amended the solicitation (amendment No. 0009) to provide for
consideration of favorable cardiovascular outcomes other than reducing MIE
and to broaden the definition of acceptable evidence.

Meanwhile, on December 3, DSCP amended the solicitation (amendment No. 0003)
to delete the solicitation option pricing provisions and to substitute an
economic price adjustment (EPA) clause. On December 29 Novartis, and on
January 19 Parke-Davis, protested to our Office that the EPA clause
improperly used a contractor's Federal Supply Schedule (FSS) prices as the
economic indicator for the purpose of calculating price adjustments under
the contract. In addition, Parke-Davis questioned the requirement in the EPA
clause that the contractor submit (at the time of final invoice for each
contract period) a written representation that the amounts invoiced under
the contract reflected all price decreases required by the EPA clause. RFP
amend. No. 0003, EPA Clause, at 9. Although continuing to maintain that the
EPA clause was valid, DSCP then amended the solicitation (amendment No.
0010) on February 19 to delete the clause.

On February 22, Novartis and Parke-Davis requested that we recommend
reimbursement of the costs of filing and pursuing their protests. (On March
2, we dismissed the protests as academic because of the agency's corrective
action.) Novartis and Parke-Davis assert that, since their protests were
clearly meritorious and the agency's corrective action occurred after it had
filed agency reports disputing the protest arguments, the corrective action
was unduly delayed so as to warrant our recommending the recovery of protest
costs.

STANDARD FOR RECOVERY OF COSTS

Under the Competition in Contracting Act of 1984 (CICA), our Office may
recommend recovery of costs where we find that an agency's action violated a
procurement statute or regulation. 31 U.S.C. sect. 3554(c)(1) (1994). Our Bid
Protest Regulations provide that we may recommend that a protestor recover
its costs of filing and pursuing a protest where the contracting agency
decides to take corrective action in response to a protest. 4 C.F.R. sect.
21.8(e) (1999). This does not mean that costs are due in every case in which
an agency decides to takes corrective action; rather, we will recommend that
a protester recover its costs only where an agency unduly delayed its
decision to take corrective action in the face of a clearly meritorious
protest. Baxter Healthcare Corp.--Entitlement to Costs, B-259811.3, Oct. 16,
1995, 95-2 CPD para. 174 at 4-5. Thus, as a prerequisite to recovery of costs
where a protest has been settled by corrective action, the protest not only
must have been meritorious, but also must have been clearly meritorious,
i.e., not a close question. Id.; GVC Cos.--Entitlement to Costs, B-254670.4,
May 3, 1994, 94-1 CPD para. 292 at 3. Here, we conclude that the protests were
not clearly meritorious so as to warrant recovery of protest costs.

MIE

Novartis and Parke-Davis asserted in their protests that the evaluation
scheme with respect to MIE was restrictive of competition because it failed
to account for positive outcomes other than MIE, and limited evidence of MIE
to studies published in peer-reviewed medical journals. The protesters
contended that the evaluation scheme failed to consider that different
statins can produce various positive outcomes which aid in illuminating a
particular statin's overall value, and that there is other relevant and
reliable evidence of positive outcomes besides studies published in
peer-reviewed medical journals. According to the protesters, the agency's
evaluation scheme improperly favored statins which had been on the market
for a relatively long period of time.

Where an agency has deliberated and reached a considered judgment concerning
a medical policy, we do not believe that it is appropriate for our Office to
review that policy or judgment under our bid protest function. Hoechst
Marion Roussel, Inc., B-279073, May 4, 1998, 98-1 CPD para. 127 at 5; Pfizer,
Inc., B-277733, Oct. 27, 1997, 97-2 CPD para. 119 at 2-3; Pfizer, Inc.,
B-276362, June 6, 1997, 97-1 CPD para. 205 at 6. In choosing to include MIE as
an evaluation factor, DSCP determined that MIE provided a useful and
effective gauge for assessing a statin's ability to produce a clinically
desired outcome; the agency found that MIE is an important factor that
provides greater confidence that a statin will produce a desired, favorable
outcome and that, unlike some other possible outcomes, it is a relatively
uniformly defined and measured outcome such that it facilitates valid
comparisons between studies. Contracting Officer's Report (B-281681), Jan.
12, 1999, at 8; Contracting Officer's Report (B-281681.3, B-281681.4), Jan.
12, 1999, at 3-4. In addition, DSCP determined to limit evidence of MIE to
studies published in peer-reviewed medical journals on the basis that the
peer-review process provides a greater assurance about the reliability and
validity of the conclusions in a study (which is likely to have been
performed and/or paid for by a drug's manufacturer). Contracting Officer's
Report (B-281681.3, B-281681.4), Jan.12, 1999, at 5-6.

While reduction in the incidence of fatal and non-fatal MIE is not the only
positive outcome that a particular statin may produce, and studies published
in peer-reviewed medical journals are not the only evidence of MIE, they
were the outcome and evidence the agency--in its considered medical
judgment--deemed necessary to satisfy its medical needs. The protesters'
disagreement with DSCP's decision would not provide a basis to review the
agency's medical judgment. Thus, the protests in this regard were not
clearly meritorious and did not warrant recovery of protest costs. [2]

Other Protest Grounds

As noted above, the protesters raised two additional general challenges to
the solicitation. First, in its December 9 protest, Novartis contended that
amendment No. 0002 introduced an ambiguity into the solicitation with
respect to the evaluation scheme. Specifically, as subsequently explained in
its comments on the administrative report, Novartis argued as follows:

Amendment No. 0002 . . . converted MIE from a tie-breaker to a separate
evaluation factor, without indicating how this new factor [would] relate to
the integrated cost/technical trade-off inherent [in] the best value
determination that the Agency would make when it evaluated cost-efficacy. As
amended, the Solicitation gave no indication as to how MIE (a purely
non-price factor) would be weighed against the integrated assessment of cost
and technical merit conducted under the cost-efficacy evaluation factor.
That is, the Solicitation provided no mechanism for calculating an overall
technical score including MIE which could then be weighed against price.

Novartis Comments, Feb. 1, 1999, at 3. DSCP, on the other hand, maintained
that the solicitation was clear on its face as to the basis for award: the
cost figure derived from the cost-efficacy calculation (the annual drug cost
per patient successfully treated so as to attain their cholesterol-lowering
goal) would be considered with the other evaluation factors, MIE and past
performance, in descending order of importance (as provided for by amendment
No. 0006), and a cost-technical tradeoff then would be made using these
factors. Contracting Officer's Report (B-281681), Jan. 12, 1999, at 4-5.

Second, in their protests of the EPA clause added by amendment No. 0003,
Novartis and Parke-Davis generally asserted that an EPA clause using a
contractor's FSS prices as the economic indicator for the purpose of
calculating price adjustments was improper because the clause was not one of
the three general types of EPA clauses listed in Federal Acquisition
Regulation (FAR) sect. 16.203-1, and was inconsistent with the concepts
underlying that provision. Further, because the EPA clause allegedly was
improper, the protesters asserted, it did not furnish a basis for the
exercise of option years under the contract. In addition, Parke-Davis
challenged the requirement in the EPA clause for the contractor to submit a
written representation that the amounts invoiced under the contract
reflected all price decreases required by the EPA clause, on the basis that
this was not one of the representations and certifications authorized under
FAR sect.sect. 12.301(b)(2) and 52.212-3 when acquiring commercial items.

In response to the protests, DSCP maintained that the EPA clause was
unobjectionable because it was in fact consistent with the types of EPA
clauses described in FAR sect. 16.203-1. Further, DSCP noted that it had
received approval for a class deviation from the requirements of FAR
sect. 16.203-1. Contracting Officer's Report (B-281681.6), Feb. 3, 1999, at 3-4.
In addition, the agency contended that the limitation in FAR sect. 12.301(b)(2)
on required representations and certifications when acquiring commercial
items concerned only solicitation provisions, not contract clauses, and thus
did not apply to the contract requirement challenged by Parke-Davis. FAR
sect.sect. 52.101(a), 52.212-3; Contracting Officer's Report (B-281681.6), Feb. 3,
1999, at 8-9.

As noted above, we will only recommend reimbursement of costs where the
agency's corrective action was both unduly delayed and taken in response to
a clearly meritorious protest. Baxter Healthcare Corp.--Entitlement to
Costs, supra, at 4-5.

Our Office did not resolve these additional protest grounds, and the agency
has not conceded that its actions violated procurement statutes or
regulations; in this regard, the mere fact that an agency has taken
corrective action does not establish that a statute or regulation was
violated. Spar Applied Sys.--Declaration of Entitlement, B-276030.2, Sept.
12, 1997, 97-2 CPD para. 70 at 5; Network Software Assocs., Inc.--Request for
Declaration of Entitlement to Costs, B-250030.4, Jan. 15, 1993,
93-1 CPD para. 46 at 3. Regardless of whether our Office would have ultimately
sustained or denied these protest grounds--a matter not for resolution in
the context of a cost claim--we do not view the issues as clearly
meritorious, and therefore do not recommend that costs be paid.

The requests are denied.

Comptroller General

of the United States

Notes

1. The solicitation as amended continued to provide for consideration of the
inconvenience of switching patients to the contracted statins in the event
that proposals otherwise were essentially equal after application of the
above factors.

2. The protesters also objected to the fact that the solicitation provided
for the agency to evaluate a statin more favorably if at least one study
showed that the statin produced a statistically significant reduction in
MIE; the protesters asserted that this provision overlooked clinically
significant outcomes. DSCP explained that the solicitation did not
differentiate between clinical and statistical significance, but instead
simply provided that the agency would evaluate more favorably a clinical
outcome--reduction in MIE--that is statistically significant. Contracting
Officer's Report (B-281681.3, B-281681.4), Jan. 12, 1999, at 7-9; RFP, Oct.
23, 1998, at 33 and amend. No. 0007. The agency's determination as to the
type of evidence of MIE that was important for evaluation purposes was a
matter of medical judgment that we will not review. Hoechst Marion Roussel,
Inc., supra, at 5. Thus, the protesters' arguments in this regard were not
clearly meritorious so as to warrant recovery of protest costs.