VA: Buying medications outside of contracts was just an effort to help veterans

February 1, 2012

The Department of Veterans Affairs’ purchase of $1.2 billion in pharmaceuticals since 2004 in violation of federal law and regulations was the result of “a team failure” at the department, VA Deputy Secretary W. Scott Gould told the House Veterans Affairs Committee on Wednesday.

Gould and a panel of other VA officials testified that the actions did not represent criminal wrongdoing or fraud. Instead, they described the violations as misguided efforts to ensure that veterans could get drugs unavailable through the normal contracting process.

“It broke down to such an extent that the wrong way became the ‘way we’ve always done it,’ ” Gould testified.

Committee members excoriated the department for its conduct and vowed to continue investigating the matter.

“What VA has been doing is not mere bureaucratic oversight,” said Rep. Jeff Miller (R-Fla.), chairman of the committee. “It is illegal, with serious potential ramifications for veterans.”

The VA reported that about 96 percent of the $30 billion it spent on pharmaceutical products since 2004 through a prime vendor contract with health care giant McKesson complied with all laws and regulations.

However, 4 percent was purchased using an “open market” clause allowed under the contract.

Federal acquisition regulations outline procedures on how agencies can purchase items not on contract. But VA officials ignored the procedures and simply purchased the items from McKesson, thus skirting rules requiring a degree of competition. This may have resulted in an overpayment and compromised patient safety, members of the committee said.

“We are here because VA has once again demonstrated an inability to perform at the level expected in managing procurement processes,” said Rep. Michael H. Michaud (D-Maine).

The drugs purchased outside of the contract were all FDA-approved, the VA said. In some cases, the ordering officers were requesting less-expensive generic equivalents for name-brand medications.

“At no time were our veterans put at risk,” Gould said.

Committee members were irate at how long it took for the VA to end the improper purchases.

“We know that senior officials at the department have known of these practices for a long time yet did little to address the issue, and certainly were not forthcoming about it to Congress,” Miller said.

Miller said his committee is working with the House Committee on Oversight and Government Reform, chaired by Rep. Darrell Issa (R-Calif.), to subpoena VA documents.

“Putting veterans at risk through illegal contracting is shameful,” Issa said in a statement.

Some officials at the VA were aware of the problem in 2009, and Gould said he was “very unhappy” with how long it took for him to learn about it.

Gould said that VA “senior leadership” did not learn of the violations until September. The VA did not order a stop to the practice until November, Gould said, because he wanted to ensure that veterans did not lose access to their medications. “We could not allow a single veteran to be put in harm’s way,” he said.

The violations were the VA’s responsibility and not the fault of McKesson, Gould said.

The VA has ordered training for employees who order pharmaceuticals and is developing new contracting language that will prevent the problems from recurring.

Committee members were skeptical. “VA readily admits that violations took place, and they are quick to assure us that changes have been implemented to fix the deficiencies at hand,” Michaud said. “But frankly, I have heard it all before.”

Steve Vogel is a reporter for the national staff of The Washington Post who covers the federal government and frequently writes about the military and veterans.
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