S.C. House leader defends company's business with insurer

COLUMBIA -- House Speaker Bobby Harrell asked a state agency last year to quickly approve allowing a Medicaid insurer a new option to purchase drugs.

Since the request by the insurer, Charleston-based Select Health of South Carolina, was allowed, Select Health has spent thousands of dollars with a drug company Harrell owns.

According to e-mails obtained under the S.C. Freedom of Information Act, Harrell asked the state Department of Health and Human Services to quickly review a request to allow Medicaid managed-care company Select Health to use "pharmaceutical repackaging."

Pharmaceutical repackagers are an emerging industry. The repackaging companies buy generic drugs wholesale, repackage them into smaller amounts and sell the smaller amounts to doctors for sale in their offices.

Harrell owns Palmetto State Pharmaceuticals, a Charleston-based repackager that sells PrimaryRX-labeled generics, according to his statement of economic interest filed with the State Ethics Commission.

Any resulting sales, Harrell said, are a tiny fraction of his company's business.

Critics of the deal have questioned Harrell using his position as speaker of the House to intervene in a matter from which he would profit. Others believe his business ties to Medicaid are hypocritical after a floor speech this year during debate to raise the cigarette tax. In that speech, Harrell criticized expanding the Medicaid program, saying it would create a generation of children who felt entitled to state-funded health care.

The issue of pharmaceutical repackaging is at the center of a growing debate in the medical community. Pharmacists say they are worried that doctors selling drugs directly to patients could open the door to more medical errors. Harrell said he is being criticized because the burgeoning repackaging industry will cut into the bottom line of traditional pharmacists.

"There's nothing that my company is doing that is inappropriate in any way," Harrell said, adding that he was upfront with the agency about his interest in the matter. "I find myself from time to time, like any other business owner, I need to talk to state government about what we're doing."

Harrell and Select Health both noted that the company required no approval from Health and Human Services to use pharmaceutical repackagers it was already allowed under federal rules and that no one asked the agency to change any of its rules. Harrell said he was trying to help the company, the state's largest Medicaid managed-care provider, save money and help patients more easily obtain their prescriptions.

Select Health spokeswoman Tracy Pou said the company contracts with physicians, who are free to choose whichever drug supplier they want. Harrell said his company does not deal directly with insurers, such as Select Health, only physicians.

Physicians with Select Health contracts, Harrell said, account for at most $7,000 of business, or a fraction of 1 percent of Palmetto State Pharmaceutical's sales across the Southeast. About half the company's sales, Harrell said, are accounted for by patients who pay without insurance.

Select Health's query about pharmaceutical repackaging began in 2006, when the company first inquired about its legality. Health and Human Services told the company Aug. 30, 2006, that Medicaid rules allowed those services.