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Veterans agency knew of improper buying under McKesson contract

By Kathleen Miller,

The Department of Veterans Affairs violated federal regulations by making unauthorized purchases through McKesson Corp.’s multibillion-dollar drug contract, Secretary Eric Shinseki said in a letter to a congressman.

The agency discussed the violations internally as early as March 2011 but did not bar employees from buying items that were not covered by the contract until Nov. 10, according to the Dec. 20 letter. High-level agency officials were aware of the practice, Josh Taylor, a VA spokesman, said in an Jan. 11 e-mail.

Government buying without contracts curbs competition and can cause agencies to pay more than they should, said Lee Dougherty, a lawyer who oversees the government contracts division at General Counsel, a law firm in McLean.

“Other companies that could have competed to provide the same product suffer because they may have lost out on an opportunity, and if they could have provided items at a cheaper price then taxpayers suffer, too,’’ Dougherty said in a phone interview.

VA considered modifying the contract last year, according to Shinseki’s letter to Rep. Joe Donnelly (D-Ind.), a member of the House Veterans’ Affairs subcommittee on investigations. The letter does not provide details of the proposed changes, though it says modifications were “not possible.’’

“The ordering practices by these officials did not conform to the Federal Acquisition Regulation,’’ Shinseki said in the letter.

The House Committee on Veterans’ Affairs has scheduled a hearing on the agency’s use of the drug supply contract for Feb. 1.

VA employees may have spent billions of dollars in the past several years on purchases without contracts, potentially putting patients at risk of receiving in­effective or unsafe medicine, according to allegations that Donnelly cited in an October letter to Shinseki.

“No veterans were put at risk,’’ Shinseki said in his letter.

The agency has also questioned whether it received a fair price on as much as 5 percent, or $226 million, of almost $4.3 billion in drug spending last year through the McKesson contract.

The congressman is “continuing to examine this issue and has no further comment at this time,’’ Elizabeth Shappell, Donnelly’s spokeswoman, said in an Jan. 11 e-mail.

Kris Fortner, a spokesman for San Francisco-based McKesson, didn’t respond to an e-mailed request for comment.

McKesson’s contract expires in May. It is vying with companies such as AmerisourceBergen and Cardinal Health for the next version of the contract.

VA amended the terms of the coming contract to prohibit non-contract buying. The agency will award the next contract by the end of March, according to Shinseki’s December letter.

A VA spokesman has said the agency hopes to make the award by the end of January.

The VA inspector general and Congress are investigating the extent to which the current contract was used for unauthorized purchases.

— Bloomberg Government

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