Federal Government Still Striving To Establish Single Drug Procurement System

HRD-80-59: Published: Jun 30, 1980. Publicly Released: Jul 10, 1980.

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In a review of the prescription drug procurement activities of the Department of Defense (DOD) and the Veterans Administration (VA), their efforts and those of the Office of Federal Procurement Policy (OFPP) to establish and implement a uniform system for the procurement of drugs among federal agencies were examined. Such a system would eliminate duplication and reduce costs. Currently, drugs are bought centrally through each agency's depot system, through Federal Supply Schedule drug contracts, or locally from drug suppliers. An OFPP policy, which has guided executive agencies in this effort since 1977, requires the purchase of commercial off-the-shelf products when such products will adequately serve the government's needs and the government's use of commercial distribution channels in supplying these products. The commercial products policy relies on comprehensive market research and analysis to develop a suitable and cost effective acquisition strategy.

In June 1978, DOD and VA established a DOD-VA Shared Procurement Program. The incompatibility of the two major supply systems was highlighted when both agencies issued contracts under the program. On the whole, DOD, VA, and OFPP have made only limited progress in fully implementing the program. Consideration of issues related to the commercial products policy would improve the agencies' market research and analysis efforts and result in better acquisition strategies for federally managed medical materiel items. Individually, DOD and VA centralized drug procurement systems have attempted to use competitive means to buy drugs. However, the number of drugs which can be bought competitively has been limited. Several additional supply sources which could have been solicited had been overlooked. Both agencies procured the same prescription drug items at different prices. Additional savings could have been possible by substituting lower priced therapeutically equivalent drugs for other higher cost drugs currently stocked by DOD and VA. As of 1972, the practice throughout the government in procuring commercial products was to focus on the price paid for the item rather than on the total costs of procuring, stocking, and distributing the item. Failure to give consideration to total costs could result in a stronger preference for central stockage and issuance than may be justified. DOD and VA have recently given increased consideration to this overall concept in issues involving drug supply decisions.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of the Office of Management and Budget should direct the Administrator, OFPP, to: give higher priority to medical materiel-related issues; use the authority provided in the Office of Federal Procurement Policy Act Amendments of 1979 to fully implement the objectives of the DOD-VA Shared Procurement Program for medical materiel; institute actions necessary to assure that all OFPP-directed guidance on the implementation of the acquisition and distribution of commercial products (ADCOP) policy principles is fully considered and implemented by agency personnel throughout all Government medical materiel procurement activities; direct the appropriate Federal agencies to develop a single uniform Federal supply catalog for all drug, biological, and chemical reagent items; and initiate a feasibility study to explore procuring, stocking, and distributing all drugs common to the DOD and VA centralized wholesale depot system. The Secretary, DOD, and the Administrator, VA, should establish an effective market research and analysis program for drugs and medical devices; substitute, to the maximum possible extent, any lower priced therapeutically equivalent drug for a higher priced drug currently procured by the agencies' centralized wholesale drug supply systems. The Secretary, DOD, should instruct DOD supply personnel to: (1) adopt a total cost methodology for use in management decisions concerning all current and proposed drug items to be centrally procured, stocked, and distributed; and (2) eliminate from the DPSC wholesale depot system management control items which can be more cost effectively supplied through alternative methods. In addition, the Secretary of DOD should reassess the need for placement of the national stock number on each unit of issue in the light of ADCOP policy principles, its effect to date on achieving commonality for the items procured under the DOD-VA Shared Procurement Program, and the inability to exchange or receive credit for drug items returned to suppliers with national stock number markings. The Administrator, VA, should instruct VA marketing center officials to identify duplicative drug items in efforts to adopt a suitable single acquisition strategy to satisfy all Federal users and eliminate those items identified above from availability through the Federal Supply Schedules if such means of supply are not the most cost effective.

    Agency Affected:


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