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FIRST HEALTH GROUP v. NATIONAL PRESCRIPTION ADM'RS
July 19, 2001
FIRST HEALTH GROUP CORP., PLAINTIFF,
V.
NATIONAL PRESCRIPTION ADMINISTRATORS, INC., AND DAVID W. NORTON, DEFENDANTS.
The opinion of the court was delivered by: Kane, District Judge.
Plaintiff First Health Group Corp. ("First Health") initiated
this diversity action against David W. Norton ("Norton") and
National Prescription Administrators, Inc. ("NPA"), by filing a
complaint, motion for temporary restraining order, motion for
preliminary injunction, and motion for expedited discovery on
February 22, 2000. Plaintiffs complaint alleges claims of breach
of contract, misappropriation of trade secrets, breach of
fiduciary duty, tortious interference with contract, and
tortious interference with a prospective economic advantage,
against Norton and NPA, arising out of NPA's successful 1999 bid
to manage and administer Pennsylvania's Pharmaceutical
Assistance Contract for the Elderly ("PACE") program. Plaintiffs
claims against Norton arise out of his role as a former employee
of First Health (and officer-in-charge of the PACE program) and
his later role as a consultant to NPA in connection with the
preparation of its successful 1999 bid to manage and administer
the PACE program.
The Court denied Plaintiffs motion for a temporary restraining
order on February 23, 2000, and held a hearing on Plaintiff's
motion for preliminary injunction on May 15-18 and 24, 2000.
Based on the testimony presented and documentary evidence
introduced at the hearing, and upon consideration of the briefs
and proposed factual findings submitted by the parties, the
Court makes the following findings of fact and conclusions of
law. For the reasons set forth below, the court will deny
Plaintiff's motion for a preliminary injunction.
1. In 1983, the General Assembly of the Commonwealth of
Pennsylvania enacted legislation that established the
PACE program to provide prescription drugs to eligible
senior citizens.
2. The Pennsylvania Department of Aging ("PDA") administers
the program through a contractor. The contractor maintains
operations to determine cardholder eligibility, provide
cardholder services, enroll providers, maintain provider
relations, adjudicate on-line claims, administer clinical
programs (such as retrospective and prospective drug
utilization review, disease state management programs,
and establishment of drug formularies), administer
manufacturers' rebates, and manage PDA's funding stream.
3. First Health Group Corporation is the parent
company of First Health Services Corporation. First
Health Services Corporation is a national company
that manages and administers, in approximately
twenty-two (22) states, Medicaid and other public
assistance programs including, but not limited to,
government-funded entitlement programs. First
Health Services Corporation derives an important
part of its business from government-funded
pharmacy benefit programs. First Health Group
Corporation (operating through First Health
Services Corporation) is currently the contract
administrator for government-funded programs that
provide prescription drug benefits for the elderly,
such as the New York EPIC program and PACE.*fn1
4. First Health submitted a bid proposal in
response to the initial RFP issued by the PDA for
the PACE program in 1983, and was awarded the
contract.
5. Since 1983, First Health has been the only
contractor to manage and administer the PACE
program, having won three (3) subsequent bids in
1987, 1990 and 1995. The contract term of the PACE
contract entered into between PDA and First Health
in 1995 was originally three years. In 1998, PDA
extended its contract with First Health for the two
year period from 1998-2000.
6. Thomas Snedden ("Snedden"), Director of the PACE
program for PDA, has consistently given First
Health an "A-plus" rating with respect to First
Health's performance under the PACE contract.
7. In each and every re-procurement of the PACE
contract before 1999, First Health had always been
the lowest bidder.
8. Ninety-five percent of NPA's business is as an
administrator of commercial health care benefit
programs. NPA has never managed or administered
either the PACE program or a comparable
government-funded entitlement program.
9. Relevant portions of the contract between First
Health and the PDA read:
a. The Department maintains full ownership rights
to the administrative and operating system. The
Contractor understands and agrees that all
computer programs, manual procedures, operating
plans and procedures, documentation, data,
records
and related items developed by Contractor for, or
used by Contractor in the administration of the
PACE program (except for Contractors' or any
subcontractors' proprietary software, proprietary
software leased or licensed by the Contractor or
any subcontractors and those items directly
related) are owned without qualification by the
Department, and that such ownership of these
elements shall continue and remain in the PACE
program unimpaired during the term of, and
subsequent to termination of this Agreement. Any
enhancements to, changes in or augmentation or
creation of any such elements during the term of
this Agreement shall be owned by the Department
without qualification. It shall be a fundamental
duty of the Contractor to ensure Department
ownership of such elements in such manner and at
such times as herein provided.
b. In the event Contractor or subcontractor
proprietary software utilities (programs) are
utilized in the operation of the system,
Contractor agrees upon request by the Department
to grant to the Department at the end of [this
agreement] a non-exclusive, nontransferable
license for three years to use the programs
required to operate the PACE system subject to
the following conditions: [t]he programs shall
only be used by the Department or the
Department's successor PACE contractor(s) to
operate the PACE system. . . .
c. All computer files, computer programs and
related items developed by the Contractor for the
program shall be owned fully and without
restriction by the Department. . . .
10. While the PDA owns the administrative and
operating system, it does not own the way in which
the Contractor ties together all the individual
elements to manage the PACE program.
11. The contract requires that First Health
provide documentation for proprietary software
directly affecting the PACE program including "the
name of the software vendor, the method of
acquisition, the identification of the party
responsible for maintenance . . . warranties
applicable to the software and the software
contract or lease."
12. The contract further requires First Health to
deliver to the PDA a description of all manual
procedures, including copies of the programs, the
instruction manuals and the procedure manuals that
are used.
13. On or about September 14, 1999, PDA forwarded
the its request for proposals ("1999 RFP") for the
contract to manage and administer the PACE program
for the period commencing July 1, 2000 to First
Health, NPA and other potential bidders.
14. Norton was not on PDA's list of potential
bidders for the PACE contract, and did not receive
a copy of the 1999 RFP from PDA.
15. The 1999 RFP required all bid proposals to
include, among other things, a technical proposal
setting forth (i) a statement of understanding,
management summary, work plan (addressing the
three separate tasks of program takeover,
operation and turnover), bidder's experience and
personnel (collectively the "technical proposal");
(ii) a proposal to include Socially/Economically
Restricted Businesses ("SERB"), and (iii) a cost
and price proposal.
Norton's Employment with First Health
17. In 1974, The Computer Company (now known as
First Health) first hired Norton as an analyst and
programmer in its information systems area.
18. From approximately 1990 to 1993, Norton was
the vice president and officer-in-charge of the
PACE program and was responsible for, among other
things, the day-to-day operations of the PACE
program and First Health's business relationship
with PDA.
19. As part of his job responsibilities, Norton
served as the principal liaison between First
Health and PDA and Snedden.
20. On or about October 1, 1997, Norton and First
Health executed an Employment Agreement (the
"Agreement"). The Agreement sets forth the terms
of Norton's employment with respect to First
Health's pharmacy management and benefits
programs, and delineated certain contractual
obligations that Norton agreed to honor.
21. In return for executing the Agreement, Norton
received the following consideration: (i) a
guarantee of one-year of employment, with
successive automatic renewals (unless the
Agreement was terminated), (ii) participation in
First Health's management incentive plan, and
(iii) stock options.
22. Section 6 of the Agreement, entitled
"Termination," states: Either party may terminate
this Agreement at any time following the Initial
Term, without cause and without any liability to
[First Health], upon no less than one hundred and
twenty (120) day's [sic] prior written notice. In
such event, [Norton] if requested by [First
Health], will continue to render Employee Services
and be paid [Norton's] regular compensation up to
the date of termination in accordance with [First
Health's] then-current payroll policies and
procedures.
23. Section 7 of the Agreement, titled
"Confidentiality" states:
Norton agrees not to directly or indirectly use or
disclose, for the benefit of any person, firm or
entity other than [First Health] and its subsidiary
companies, the Confidential Business Information of
[First Health]. Confidential Business Information
means information or material which is not generally
available to or used by others or the utility or
value of which is not generally known or recognized
as a standard practice, whether or not the underlying
details are in the public domain, including but not
limited to its computerized and manual systems,
procedures, reports, client lists, review criteria
and methods, financial methods and practice, plans,
pricing and marketing techniques as well as
information regarding [First Health's] past, present,
and prospective clients and their particular needs
and requirements, and their own confidential
information.
Upon termination of employment, with or without
cause, [Norton] agrees to return to [First Health]
all policy and procedure manuals, records, reports,
notes, data, memoranda, and reports of any nature
(including computerized and electronically stored
information) which are in [Norton's] possession
and/or
control which relate to (i) the Confidential Business
Information of [First Health], (ii) [Norton's]
Employment with [First Health], or (iii) the business
activities or facilities of [First Health] or its
past, present, or prospective clients.
24. Section 8 of the Agreement, titled
"Restrictive Covenant" states, in pertinent part:
For a period of one year after termination of
employment, with or without cause, [Norton] will not
directly or indirectly, for the purpose of selling
services provided or planned by [First Health] at the
time the employment was terminated, call upon,
solicit or divert any actual customer or prospective
customer of [First Health]. An actual customer, for
purposes of this Section, is any customer to whom
[First Health] has provided services within one year
prior to [Norton's] termination. A prospective
customer, for purposes of this Section, is any
prospective customer to whom [First Health] sought to
provide services within one year prior to the date of
[Norton's] termination and [Norton] has knowledge of
and was involved in such solicitation. For the
purposes of this Section, responding to an
unsolicited request for proposal by a customer or
prospective customer which is a government agency or
government contractor will not constitute a violation
of [Norton's] obligation hereunder.
25. Section 9 of the Agreement, titled
"Non-Solicitation of Employees," states:
[Norton] further agrees that for a period of one year
from the date of [Norton's] termination, with or
without cause, [Norton] shall not directly or
indirectly solicit or hire any person who is
currently or was an employee of [First Health] at any
time during the twelve months prior to [Norton's]
termination.
26. Section 10 of the Agreement, titled
"Remedies," states:
In the event [Norton] breaches or threatens to breach
Section 7, 8 or 9 of this Agreement, [First Health]
shall be entitled to injunctive relief, enjoining or
restraining such breach or threatened breach.
[Norton] acknowledges that [First Health's] remedy at
law is inadequate and that [First Health] will suffer
irreparable injury if such conduct is not prohibited.
[Norton] and [First Health] agree that, because of
the difficulty of ascertaining the amount of damages
in the event that [Norton] breaches Section 9 of this
Agreement, [First Health] shall be entitled to
recover, at its option, as liquidated damages and not
as a penalty, a sum equal to one year's salary of the
employee(s) solicited to leave [First Health's]
employ. The parties further agree that the existence
of this remedy will not preclude [First Health] from
seeking or receiving injunctive relief.
[Norton] further agrees that the covenants contained
in Sections 7, 8 or 9 shall be construed as separate
and independent of other provisions of this Agreement
and the existence of any claim by [Norton] against
[First Health] shall not constitute a defense to the
enforcement by [First Health] of either of these
paragraphs.
27. Norton participated in the preparation of
First Health's 1990 bid proposal for the PACE
contract as a member of First Health's editing
team. Particularly, Norton gathered cost
information pertaining to the development of a
point-of-sale prescription claims processing
system for the PACE program.
29. Norton, in his role as vice president and
officer-in-charge of the PACE program, was
responsible for the general management of First
Health's PACE office and staff, as well as the
budget and financial information of the PACE
program. Norton also prepared cost projections for
the contract with PDA, including costs for
personnel and equipment, and prepared a budget of
the cost to operate First Health's PACE office in
Harrisburg, Pennsylvania. Norton implemented a
clinical program of prospective drug utilization
review, and initiated the development and
installation of the imaging system for cardholder
eligibility and other documents. Norton gained
intimate knowledge of First Health's profit
margins with respect to the PACE program.
30. In 1993, First Health promoted Norton to
senior vice president of its pharmacy business
unit, a position he held until 1998. In this
capacity, Norton was responsible for overseeing
the management and administration of all of First
Health's pharmacy business including, but not
limited to, the PACE program. In his capacity as
senior vice president of First Health's pharmacy
business unit, Norton was responsible for bringing
the PACE program's ancillary programs on line, and
approved strategic planning for those ancillary
programs.
31. Further, in his capacity as senior vice
president of First Health's pharmacy business
unit, Norton (1) met with PDA representatives and
visited First Health's PACE office in Harrisburg
every four to six weeks, (2) continuously
monitored the operations of the PACE program, (3)
knew of the status of the PACE program at any
given time, (4) approved strategic planning for
the PACE ancillary programs, and (5) discussed
with PDA the directions or enhancements that PDA
wanted for the PACE program.
32. In his capacity as senior vice president of
First Health's pharmacy business unit, Norton was
also responsible for all First Health pharmacy
contracts including, but not limited to, New York
EPIC, Oregon Medicaid, Washington, D.C.
Point-of-Service, Virginia Medicaid
Point-Of-Service and RetroDUR, Alaska
Point-of-Service and RetroDUR and Rebate, South
Carolina RetroDUR, North Carolina RetroDUR, Blue
Cross/Blue Shield of North Carolina, Blue Cross of
Northeast Pennsylvania, Nebraska Medicaid,
Healthpass, TennCare and Promark.
33. In preparing First Health's response to the
1995 RFP for the PACE contract, Norton defined the
technical, cost and price strategies for First
Health's bid proposal, and determined the
enhancements to be added to the PACE program.
Norton also wrote and/or edited each section of
First Health's bid proposal, and assisted in
determining First Health's price for both the
capitation and non-capitation proposals that were
required by the RFP.
34. In his capacity as senior vice president of
First Health's pharmacy business unit, Norton was
intimately involved with the preparation of all
the bid proposals submitted by the pharmacy
business unit including, but not limited to, the
technical and cost proposals of First Health's
1995 bid proposal for the PACE contract, and First
Health's cost proposal for the 1998-2000 PACE
contract extension. Norton knew First Health's
profit margins on the PACE program with respect to
First Health's cost proposals for the 1995 PACE
contract and the 1998-2000 contract extension.
35. Norton gained an intimate knowledge of First
Health's costs, pricing and profit margins, and
helped First Health win numerous bids for
government-funded pharmacy benefit programs
including, but not limited to, bids pertaining to
the PACE program and the New York EPIC program.
Norton prepared the technical and cost proposal
strategies for First Health's bid for the New York
EPIC contract; more specifically, Norton
determined the takeover cost for First Health's
takeover cost proposal. In his capacity as senior
vice president of First Health's pharmacy business
unit, Norton had overall management authority of
First Health's takeover of the New York EPIC
program, which included a takeover of some of the
incumbent contract administrator's staff.
Norton's Departure from First Health
36. Sometime between March and June 1999, Norton
decided to leave his employment with First Health.
37. On June 7, 1999, First Health sent a letter to
Norton that (i) described his severance package,
(ii) stated that the effective date of his
employment termination was October 28, 1999, and
(iii) reminded him to adhere to the restrictive
covenants set forth in the Agreement. The letter
stated that Norton would be on First Health's
payroll until October 28, 1999, yet it also
contemplated that he might work for another
company before his last day on the payroll at
First Health. The letter informs Norton that "[i]f
you are employed by another company prior to
October 28, 1999, or serve in a consulting
capacity, you are not specifically required to
notify First Health, although all of the
provisions of your Employment Agreement apply."
Norton completed most of his work for First Health
in June 1999.
38. In or around April, 1999, Norton met Snedden
of the PDA for dinner in Harrisburg and, during
their visit, Norton told Snedden that they would
not be able to speak for a period of time.
39. In May 1999, Norton and former First Health
executive Richard Hofheimer ("Hofheimer") met
Snedden for dinner in Harrisburg and discussed,
among other things, the potential impact of an
outpatient prescription drug benefit under
Medicare on state-funded pharmacy assistance
programs such as PACE.
40. Between June 1999 and November 1999, Norton
and Hofheimer marketed themselves to various
companies as consultants interested in (i)
assisting a vendor in preparing and submitting a
successful bid proposal for the PACE contract, and
(ii) maintaining an ongoing business relationship
with the successful vendor.
41. On November 15, 1999, Norton telephoned NPA
President Richard Ullman ("Ullman") and offered to
assist NPA in the preparation and submission of
NPA's 1999 bid proposal for the PACE Contract.
42. On November 17, 1999, Norton attended an
in-person interview with NPA senior management
representatives Ullman, NPA General Manager Allan
Zimmerman ("Zimmerman") and Vice President of
Finance Steven Nicoletos ("Nicoletos") for the
purpose of discussing Norton's ability to assist
NPA in the preparation and submission of its 1999
bid proposal for the PACE contract, and whether or
not NPA wanted to retain him as a consultant.
43. During his November 17, 1999 interview with
NPA, Norton stated that he was out of work and
could help NPA prepare its 1999 bid proposal for
the PACE contract. Norton also described his prior
employment at First Health, and his intimate
knowledge of, and experience with, the PACE
program.
44. At the interview Norton told NPA that he would
not divulge any confidential information related
to anything that First Health had done. Norton
further disclosed that he had executed an
employment agreement with First Health that
contained restrictive covenants.
45. During his interview, Norton provided NPA with
a single-page document which he prepared that
purported to represent limitations on his future
employment. However, the document set forth only
Section 7 (confidentiality) and Section 8
(customer non-solicitation) of his Agreement with
First Health. The single-page document did not set
forth Section 9 (employee non-solicitation) of the
Agreement, nor the remainder of the Agreement.
46. Between the November 17, 1999 interview with
NPA and NPA's submission of its 1999 bid proposal
for the PACE contract on December 10, 1999, Norton
did not discuss the restrictive covenants in his
First Health Agreement with anyone at NPA. During
that time, Norton did not receive anything in
writing from NPA that cautioned him to adhere to
the restrictive covenants in his First Health
Agreement.
47. NPA believed that Norton, as a result of his
PACE experience with First Health, could provide
information about the PACE program that NPA did
not already possess.
48. On or about November 17, 1999, NPA hired
Norton as a consultant pursuant to a consulting
agreement ("Consulting Agreement"). The Consulting
Agreement provided that Norton would provide NPA
with consulting services with respect to the
preparation and submission of NPA's 1999 bid
proposal for the PACE contract.
49. Allen Langjahr, NPA's general counsel, drafted
the Consulting Agreement for Norton's execution
without first reviewing or examining Norton's
contract with First Health or any provisions
therein.
50. The Consulting Agreement contains a
confidentiality provision that precludes Norton
from disclosing NPA's "trade secrets," as the term
is defined in the agreement, and a restriction
against soliciting employees.
51. As part of his Consulting Agreement with NPA,
Norton, in the course of preparing and presenting
NPA's bid proposal for the PACE contract, was
permitted to use the services of Hofheimer as
needed. Norton recommended that NPA retain
Hofheimer because Norton believed that Hofheimer
could provide valuable assistance to NPA with
respect to the drafting and editing of the
"Management Summary" portion of NPA's 1999 bid
proposal for the PACE contract. NPA retained
Hofheimer in mid-November 1999.
52. Over the three-week period when Norton
consulted with NPA about PACE, Norton billed NPA a
total of one hundred and seventy seven hours, or
an average of about sixty hours per week, for the
work that he performed in preparing and submitting
NPA's 1999 bid proposal for the PACE contract. For
the services that he rendered in connection with
preparing NPA's bid proposal for the PACE
contract, and before NPA's oral interview with
PDA, NPA paid Norton approximately $15,000.
53. For the services that he rendered in
connection with preparing NPA's bid proposal for
the PACE contract, NPA paid Hofheimer
approximately $5,000.
54. NPA submitted bid proposals for the PACE
contract in 1990 and 1995.
55. NPA was not awarded the PACE contract in 1990
or 1995 because PDA's bid proposal evaluation
committee gave NPA's technical and cost proposals
scores that were significantly lower than the
scores given to First Health. PDA determined that
NPA's bids were too expensive and poorly prepared.
56. In its 1995 bid proposal, NPA bid a price for
the entire PACE contract that was approximately
twenty-five percent (25%) higher than the price
proposed by First Health.
57. In October, 1999, prior to Norton's arrival at
NPA, the draft bid proposal prepared by NPA
("October draft") was little more than a repeat of
NPA's 1995 proposal.
58. In October, 1999, before Norton began work for
NPA, Peter Grieger, who prepared the losing 1990
and 1995 bid proposals for NPA, went to PDA's
procurement library with two other NPA employees
to view the 1995 First Health proposal, including
its cost proposal section, and the 1998-99
contract extension. Neither Grieger nor the other
NPA employees were given access to the cost
proposal section of First Health's 1998-2000
contract extension.
59. While working on NPA's 1999 bid proposal,
Norton met with Zimmerman on a weekly basis to
discuss Norton's recommendations for, and
preparation of, NPA's 1999 bid proposal. Norton's
responsibilities on NPA's 1999 bid included:
a. preparing a spreadsheet with his estimates of
the costs to administer the PACE program,
including an estimate of takeover costs based on
current PACE contract percentages;
b. following up with Paragon Systems;
c. adding management staffing and takeover
section;
d. adding one extra third-party liability
coordinator above and beyond First Health's
requirement, to obtain more dollars;
e. reading the new NPA takeover section;
f. adding recruitment, hiring incentives and
switch vendor notification into NPA's work plan;
g. drafting and/or editing portions of NPA's 1999
technical proposal; and
h. serving as a member of NPA's "red team" of bid
proposal reviewers, and therefore "touching"
every page of NPA's 1999 bid proposal.
60. Norton recommended to NPA that it propose him
as the officer-in-charge of the PACE program.
61. NPA's final 1999 bid proposal for the PACE
contract proposes Norton as the officer-in-charge
of the PACE program, and states NPA's intention to
recruit and hire First Health's current 75-80
member Harrisburg PACE staff.
62. In PDA's answers to the bidders' questions
pertaining to the 1999 RFP, PDA stated that it
would react "affirmatively" to a bidder proposing
to hire many of First Health's current PACE staff.
64. First Health has invested considerable
resources in its PACE employees and their
expertise and, in the event of the award of the
PACE contract to another vendor, First Health has
a retention program through which it would use
these employees in other capacities.
65. Norton worked with Nicoletos in preparing
NPA's 1999 cost proposal for the PACE contract,
although Nicoletos spent very little time with
Norton, and Norton prepared several iterations of
NPA's cost proposal.
66. Norton prepared a spreadsheet with preliminary
cost numbers and established a methodology for
assigning those costs to the ancillary programs
that are part of the RFP.
67. The cost proposal of a bid was required to
contain a fixed price for each of the three tasks
of the program: Takeover, Operations, and
Turnover. The costs of each section were then
broken down as further required by the RFP.
68. Norton developed the takeover cost number for
NPA's 1999 cost proposal for the PACE contract.
69. In the cost buildup that he prepared for NPA's
1999 cost proposal, Norton also prepared estimated
preliminary costs for staffing, travel, equipment,
supplies, general operating expenses, direct
labor, other direct costs and the cost for the
maintenance of imaging equipment. However,
Nicoletos made changes to Norton's numbers for
professional staff.
70. For its 1999 bid proposal, NPA's pricing
strategy was to estimate First Health's bid price
for the 1999 contract, and then to bid a price
that was ten percent less.
71. To estimate First Health's price for the first
year of the PACE Contract, NPA reviewed First
Health's bid for the 1995-98 contract term (with
its cost proposal section), and First Health's
total price for the 1998-2000 contract extension
(without its cost proposal section), and a March
31, 1997 Dun & Bradstreet report for a company
called Health Care Compare ("HCC").
72. The cost proposal section of First Health's
1995 bid reflected that First Health's profit
margin was ten percent. To find out whether First
Health's profit margin had changed since 1995,
Nicoletos turned to the Dun & Bradstreet report.
Nicoletos understood, albeit incorrectly, that the
March 31, 1997 Dun & Bradstreet report reflected
First Health's figures for sales and net income
before taxes. From the Dun & Bradstreet Report,
Nicoletos calculated that First Health earned
about fifty percent profit. Nicoletos thus
concluded that, in its 1999 bid, First Health
would likely price its bid to include a profit
margin of between ten and fifty percent. In order
to bid carefully but competitively, Nicoletos
chose to assume ten percent as First Health's
likely profit on their 1999 bid, and chose that
figure as the amount by which he would reduce his
estimate of First Health's 1999 bid price.
74. First Health's total price for the 1998-2000
PACE contract extension was $17,691,376, or
$8,845,688 per year. The total price bid by First
Health in 1999 for the PACE contract was
$47,458,112, or $9,491,622.40 per year.
Information Regarded as Confidential and Proprietary by First
Health
75. Although the 1999 RFP sets forth PDA's general
requirements pertaining to the management and
administration of the PACE program, First Health,
as the incumbent, possessed special knowledge of
the preferences of PDA for the PACE program that
are not set forth in the 1999 RFP.
76. In order to maintain what it regards as the
confidential and proprietary nature of its
information pertaining to the administration and
management of the PACE program (including costing,
pricing, margins, marketing, and the highly
specialized procedures, processes, policies,
systems and methods of operation, as well as PDA's
particular needs, preferences and requirements for
that program), First Health
a. requires all of its employees including, but
not limited to, its PACE staff, to execute
employment agreements that contain clear and
precise obligations of confidentiality;
b. limits access to its cost proposals to First
Health's senior management in charge of the PACE
contract, the financial manager of the PACE
contract, and First Health's financial staff;
c. limits the number of individuals who prepare,
review or have access to First Health's technical
proposals to First Health's key management
personnel in Harrisburg and First Health's
proposal preparation staff in Richmond, Virginia;
d. stores its technical proposals in a locked
library, access to which is limited to certain
employees during and after preparation of the
proposals;
e. maintains a computerized financial system,
access to which is limited to First Health's vice
president of finance and his staff at First
Health's Richmond, Virginia headquarters, and
First Health's parent corporation;
f. limits access to its computer mainframe
through an information systems manager and the
mandatory use of passwords and identification
numbers;
g. enters into contracts with customers that
restrict access to First Health's proprietary
software; and
h. includes in its bid proposals a statement that
the material set forth in the bid proposal is
confidential and proprietary business information
of First Health.
77. First Health uses an imaging system to support
the cardholder application and provider enrollment
processes, and uses Paragon software and support
to do so.
78. Norton, during his tenure at First Health, was
responsible for the development of First Health's
business relationship with Paragon as it pertained
to the PACE program and the New York EPIC program.
79. NPA does not presently use imaging with
respect to claims processing, determining
cardholder eligibility or routing work flow of
documents.
80. By the terms of its contract with PDA, First
Health waived any proprietary claim to any
computer systems developed for the PACE program.
81. Neither Norton, who developed the relationship
with Paragon for First Health, nor Howells, the
current First Health officer-in-charge of the PACE
program for First Health, considered First
Health's relationship with Paragon a secret.
82. There is no evidence of any confidentiality
agreement between First Health and Paragon.
83. Paragon's website lists First Health,
Harrisburg as a customer.
84. Neither First Health's 1995 bid, nor NPA's
October draft, included mention of Paragon as ...