Baltimore Sun Examines Veterans Affairs’ Prescription Drug Purchasing
The Baltimore Sun on Wednesday examined the Department of Veteran Affairs' "muscular approach to drug purchasing," which is the "envy of private employers and insurers." George Patterson, executive director and chief operating officer of the VA Office of Acquisition and Material Management, said, "At the end of the year, we find out sales from across the commercial sector, average the price of each drug and deduct 20% from that." He added that the VA often negotiates "prices even lower than the 20% discount." Some veterans who have service-related illnesses or injuries receive medicines at no cost. VA beneficiaries are able to get such discounts in part because of the department's buying power -- it negotiates for itself, the Coast Guard, the Public Health Service and the Department of Defense, according to the Sun. The VA spent about $3 billion on prescription drugs last year -- compared with $750 million in 1991 -- for 4.5 million veterans. VA medical centers last year treated 6.1 million out of the total 24.5 million U.S. veterans. According to Patterson, the department's ability to negotiate drug prices comes from a 1992 law that was passed "in response to a VA budget crunch caused by rising drug prices," the Sun reports. The VA also created a drug formulary for all VA hospitals in the late 1990 and encourages the use of generic drugs, which account for 65% of all prescriptions for veterans but only 8% of drug costs. Drug companies want to participate in the VA health system partly because of the VA's "coveted" pool of young doctors that "promises a long-term use of the products," the Sun reports. Multistate drug buying pools are based on the VA purchasing model. In addition, some lawmakers have suggested that Medicare use the VA model to negotiate prices for its beneficiaries. However, the new Medicare law bars the practice because some legislators said that doing so would create national price controls and lead to a reduced commitment to research and development by drug manufacturers.
According to the Sun, some are concerned that the VA's "shaky overall health care budget" could be hurt by an increase in prescriptions, as some veterans covered by private health insurance seek cheaper prescription drugs through the VA system. Congress is considering changes to the VA system, including lifting a rule requiring veterans who want drug benefits to be examined first by a VA doctor. However, Carl William Blake, associate legislative director of the Paralyzed Veterans of America, told the House Veterans Affairs' Subcommittee on Health in March that an "increase in demand [on the VA system] would necessitate shifting scarce resources away from treating veterans." Blake added, "Now is not the time ... to force the VA to treat fewer veterans or charge them more for services" (Zaneski, Baltimore Sun, 5/5).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.