Federal Reports

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The VA Office of Inspector General (OIG) determined that the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) had not been given the authority to require drug manufacturers to make drugs available at discounted prices to VA if the same items had been dispensed to veterans through VA pharmacies. If CHAMPVA had this authority, VA could have saved about $69 million of the $181 million the CHAMPVA insurance program paid for retail pharmacy claims in FY 2018. VA is one of four federal agencies eligible by law to receive at least a 24 percent discount for prescription drugs purchased for its facilities and dispensed directly to patients. However, for prescription drugs purchased through retail pharmacies for CHAMPVA beneficiaries, VA pays the higher average contracted wholesale price because it does not have the authority to require drug manufacturers to provide the drugs at discounted prices. The OIG estimated VA could save about $345.1 million over the next five years if CHAMPVA had proper statutory authority, regulations, and processes to buy drugs through retail pharmacies at discounted prices. VA officials also identified the potential for other VA programs, in addition to CHAMPVA, to save money when purchasing drugs from retail pharmacies if VA was given authority to receive price discounts from drug manufactures for these purchases. The OIG recommended VA conduct a formal analysis to determine what steps are needed to require drug manufacturers to provide discounted prices for covered prescription drugs purchased through retail pharmacies to achieve parity with those purchased through VA pharmacies. It also recommended the under secretary collaborate with the Office of Regulatory and Administrative Affairs to pursue statutory or other changes needed to give VA the appropriate legal authority to purchase all prescription drugs through retail pharmacies at those discounted prices.

VA and other government agencies spend billions of taxpayer dollars annually through VA’s Federal Supply Schedule (FSS) contracting program. The FSS program provides the government a simplified process for acquiring commercial supplies and services in varying quantities while obtaining volume discounts. This report is a synopsis of the Office of Inspector General’s (OIG) 19 FSS pharmaceutical proposal reviews completed before VA awarded the contracts (preaward reviews) during fiscal year 2019 in order to help VA obtain the best pricing. OIG preaward reviews of FSS pharmaceutical proposals are internal reports for VA contracting officers that are unpublished due to protected sensitive commercial pricing information. The OIG is publishing this summary to provide more information on the impact of these reviews. Preaward reviews provide VA with information on whether commercial pricing disclosures are reliable for negotiations. The reviews also make pricing recommendations based on the offeror’s commercial selling practices. Preaward reports are used by contracting officers to negotiate fair and reasonable prices for the government and taxpayers. The OIG determined that commercial pricing disclosures were not reliable for negotiations for 14 of the 19 proposals and recommended VA obtain revised disclosures before awarding the contracts. The OIG’s lower FSS pricing recommendations collectively reflected more than $1 billion in estimated cost savings to VA. Nearly $203 million has been sustained by VA as of May 8, 2020. The 19 proposals included 862 offered drug items.

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