Welvista Treated Well by S.C. Legislature

September 8, 2010

Investigative Reports

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By RICK BRUNDRETT

Why is this private company getting so much public money?

It bills itself as the only nonprofit organization of its kind in the U.S.

Since 1993, Columbia-based Welvista Inc., which changed its name several years ago from CommuniCare Inc., has provided prescription drugs donated by pharmaceutical companies to tens of thousands of uninsured South Carolinians, its website (www.welvista.org) says.

Last year, 12 pharmaceuticals, including industry giants Pfizer and Johnson & Johnson, donated more than 200 name-brand medications valued at nearly $48 million, which were provided to more than 15,000 people in all 46 counties, according to organization records.

Welvista, according to its literature, provides mail-order prescriptions to people who do not receive Medicaid, Medicare or private insurance, but whose income is below 200 percent of the federal poverty line. Participants in the program pay an annual $20 registration fee.

What you won’t read in Welvista’s promotional materials, however, is that the organization has gotten a lot of help over the past several years from S.C. legislators, who at the same time have slashed about $2 billion from the state’s general fund budget.

Federal tax filings reviewed by The Nerve show that Welvista received nearly $1.8 million in government grants – mostly state funds – from 2006 through 2009. In 2008, when the state budget was feeling the full brunt of the recession, the organization received more than $917,000 from taxpayers.

It listed total expenses last year of $51.3 million, though nearly $48 million of that was the wholesale value of the donated drugs, according to tax records.

As a percentage of the organization’s operating budget, public funding jumped from well under 10 percent before 2007 to a high of 29 percent last year, tax records show.  In 2009, the number of staff or contract employees rose to 84 from 54 the year before, a nearly 56-percent increase.

From 2006 through 2009, Welvista’s longtime CEO Ken Trogdon’s annual salary shot up by nearly 59 percent, to $180,186 from $113,365, according to tax records.  Last year, he also received an additional $9,181 in benefits and a $15,000 no-interest loan for “working capital,” which was approved by the organization’s board of directors, records show.

Sitting on the board in 2008 and 2009, according to tax filings, were state Rep. Chip Huggins, R-Lexington; Nick Theodore of Greenville, a former state representative, senator and lieutenant governor; and Ken Kinard, a registered lobbyist with strong ties to the pharmaceutical and health care industry.

For the first five months of this year, Welvista paid $14,000 to Daniel Dukes to lobby state lawmakers, S.C. Ethics Commission records show. Besides Welvista, Dukes also is a registered lobbyist for Francis Marion University, a public institution.

Contacted last week, Huggins told The Nerve that he served on the Welvista board for only about a year, and that he resigned early this year because of scheduling conflicts with other commitments.

Huggins said he did not ask fellow state lawmakers to increase state funding for Welvista, though he said he set up a meeting between Trogdon and state Rep. Tracy Edge, R-Horry and chairman of the Health, Human Services and Medicaid Subcommittee of the House Ways and Means Committee.

“Tracy Edge talked to Ken Trogdon to try to get a handle on where the monies were,” Huggins said.

The Nerve reported last week that Edge authored a budget proviso amendment critics say would increase the cost of Medicaid prescriptions in South Carolina by a total of $8 million to $10 million a year, and hike pharmacies’ per-prescription profit by 30 percent.

Huggins said he did not believe his presence on the Welvista board was a factor in the organization receiving more state funds, adding, “They had (state) funding way before I got there.”

Huggins defended the state funding for Welvista, noting, “Unless there was something I was not privy to, they were stretching everything they could to meet the needs of the people.”

Contacted last week by The Nerve, Theodore, who remains on the Welvista board, also praised the organization and the spending of state tax dollars on its programs, which include a school-based, mainly Medicaid-funded pediatric dental care program in several poor counties.

“When you look at the few tax dollars as opposed to the total benefits that Welvista has gained for the public benefit, it’s a slam dunk as far as I’m concerned,” said Theodore, a Democrat who served in the House and Senate from the early 1960s through the mid-1980s, and as lieutenant governor with Republican Gov. Carroll Campbell from 1987 to 1995.

Trogdon, who has been with the organization since 1997, told The Nerve last week that besides Edge, other “strong supporters” of his organization with whom he had met to discuss funding included:

  • House Speaker Bobby Harrell, R-Charleston;
  • Rep. Dan Cooper, R-Anderson and chairman of the budget-writing House Ways and Means Committee;
  • Rep. Kenny Bingham, R-Lexington and  a member of the House Ways and Means Committee; and
  • Rep. Gilda Cobb-Hunter, D-Orangeburg, a member of the House Ways and Means Committee and the Legislative Black Caucus.

“Overall, the Black Caucus has been very supportive,” Trogdon said.

Trogdon said this was the first year that Welvista hired a state lobbyist, noting that state and federal funding for his organization was cut to $190,000 last fiscal year and remains at that level for this fiscal year. He also said he needed help after Kinard, a registered lobbyist for the Pharmaceutical Research and Manufacturers of America, left the Welvista board after serving for years.

“When Ken left the board, we needed someone to help me educate legislators on what we’re doing,” he said.

Trogdon described Huggins as a “good guy who helped me meet more legislators. He downplayed Theodore’s connection to lawmakers, saying that his role on the board “has been with the private sector in Greenville.”

Asked about the recent spike in his own salary, Trogdon replied, “Over the last year, I’ve significantly reduced it, and it won’t go back up to that ($180,186).”

Trogdon said he has had to scramble to find funding, noting that Welvista relies primarily on donations from foundations and pharmaceutical companies, which, because of the recession, have tightened their charitable belts.  He said over the past eight months, he has reduced his staff by about 10.

Trogdon defended the use of tax dollars for his organization, explaining that the donated drugs typically are used to treat serious chronic conditions, such as diabetes, for people who would otherwise be forced to go to hospital emergency rooms.

“By keeping folks healthy,” he said, “we keep them in the work force and keep them out of the health care system in the state.”

The state money that Welvista has received has flowed through the S.C. Department of Health and Human Services, which administers the state’s Medicaid program. Agency records show that Welvista received nearly $1.5 million – mostly state dollars – from the agency from fiscal years 2008 through last fiscal year.

Of the total, $400,000 was designated as “pass-through” funds to the organization, which typically are inserted into the budget by lawmakers; while another $500,000 was awarded to the organization through a competitive grants program authorized by a state budget proviso, records show.

The remaining approximate $600,000 was awarded through contracts with Welvista to refer potential Medicaid clients to HHS. For this fiscal year, which started July 1, the department renewed a $190,00 contract – to be paid with a 50-50 split of state and federal funds –to refer Medicaid clients to the agency, HHS spokesman Jeff Stensland told The Nerve last week.

The Nerve earlier reported that on average, the state’s Medicaid rolls have been growing by 2,500 per month since the official start of the recession in December 2007.

Welvista was designated to receive an additional $500,000 this fiscal year from enhanced federal stimulus money for Medicaid programs, known as Federal Medical Assistance Percentage, or FMAP, funds. But Gov. Mark Sanford vetoed the entire $213.5 million section of the approximate $21 billion state budget, contending that Congress at the time had not decided whether to extend the funding. The S.C. House sustained Sanford’s veto, though Congress later approved additional funding.

Critics of organizations receiving FMAP funds for non-Medicaid programs contend that if those funds stayed within Medicaid programs, the federal government would provide a 3-to-1 dollar match.

South Carolina is slated to receive about $138 million in additional federal money. It is unclear whether state lawmakers will earmark any of that money for special programs, such as Welvista, when they return for a new legislative session in January.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.