Manufacturers Failed to Make Some Drugs Available to Government Agencies at a Discount as Required

The Veterans Health Care Act of 1992, passed to help control the cost of pharmaceuticals purchased by the federal government, mandates that manufacturers discount drugs they sell to VA, the Department of Defense (DOD), the Public Health Service, and the Coast Guard. In return, manufacturers gain the business of supplying the largest government agencies with needed drugs and become eligible to participate in and receive funds from federal government-funded programs including Medicare and Medicaid. The public law places responsibility for compliance on manufacturers. If they do not offer their drugs as required by the law, the government cannot purchase much-needed drugs at lower prices. The OIG found manufacturers did not make 22.8 percent of drugs covered by the law available on the Federal Supply Schedule as required by the public law. This resulted in an estimated $28.1 million in overcharges to VA and the DOD. To reduce noncompliance and keep drugs more affordable, the OIG made eight recommendations including communicating exemptions given to makers of certain classes of drugs, conveying the process for requesting exemptions, and formalizing the internal process for granting exemptions. VA should also follow up with makers of the covered drugs identified in the report as not commercially sold in the event they have become available, or newly launched to ensure they have an established annual ceiling price and are available on the FSS. VA should also request self-audits by noncompliant manufacturers identified by the OIG.