Independent Audit Report of Pharma Logistics LLC’s Billing Compliance

VHA pharmacies cannot dispense drugs that are damaged or expired or will be expiring soon. To address this issue and to recover some costs, VA contracted with Pharma Logistics LLC to provide national reverse distribution services, where manufacturers accept returned drugs in exchange for credits toward future purchases. Pharma Logistics collected returned drugs, sorted them, returned them to the manufacturers, disposed of nonreturnable products, and coordinated the application of credits from manufacturers to VA accounts. The OIG’s objective was to determine whether Pharma Logistics complied, in all material respects, with its contract regarding drug return credits and billing. Of the about $114.4 million in manufacturer credits for drugs that VA facilities expected from reverse distribution services as of March 2024, VA received only about $110.3 million. Of the $4.1 million variance, over $3.6 million of the unapplied credits were related to Pharma Logistics improperly closing jobs and $526,520 was used for contract-prohibited processing fees. VA agreed with the OIG’s three recommendations for it to confer with VA’s Office of General Counsel regarding the potential recovery of credits.