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House panel reviews VA pharmaceutical contracting reforms

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Reforms put in place by the Department of Veterans Affairs to prevent the routine purchase of pharmaceuticals in violation of federal contracting laws have improved the VA procurement system but failed to eliminate improper practices, according to congressional testimony Wednesday.

“Without strong system controls, VA risks paying the incorrect price for pharmaceuticals as well as increasing their vulnerability to program fraud,” the department’s inspector general’s office reported to the House Veterans Affairs Committee, which held a hearing examining the reforms.

Earlier this year, VA acknowledged that it has bought $1.2 billion in pharmaceuticals since 2004 in violation of federal laws and regulations.

VA has bought $30 billion in pharmaceutical products since 2004 through a prime vendor contract with health-care giant McKesson. About 4 percent of the total was purchased using an “open-market” clause allowed under the contract.

But VA officials ignored federal acquisition regulations governing how agencies can purchase items not on contract. The rules require some competition, but VA simply purchased the items from McKesson, according to testimony at a hearing in February.

The inspector general reported Wednesday that procedures put in place by VA in November “did not preclude or prohibit” open-market purchasing.

The VA “may boast about reductions” in open-market purchases, but problems still exist, committee Chairman Jeff Miller (R-Fla.) said in Wednesday’s hearing.

W. Scott Gould, the VA deputy secretary, told the committee that the agency has reduced the number of “unauthorized” commitments from 70,309 in September to 434 in March.

But in reviewing the department’s data, the inspector general found the percentage of open-market purchases by VA in December was about 2.4 percent, not 0.4 percent as claimed by the department.

On the other hand, the inspector general found that VA’s open-market purchases in fiscal 2011 were “significantly less” than previously reported.

“What we found was a little surprising,” Maureen Regan, counselor to the inspector general, told the committee.

The review also found that VA was paying “the accurate amount” for goods received.

“VA staff members have worked diligently and conscientiously to provide needed pharmaceuticals to our veterans where and when they are needed,” Gould told the committee. “We have also worked to ensure that applicable laws and regulations are being followed.”

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