The Department of Veterans Affairs (VA) and the Department of Defense (DOD) provide healthcare for more than 18 million beneficiaries including veterans, active military personnel and military dependents. These health systems combine integrated hospital network care with community care access and operate under strict congressionally appropriated budgets.
To provide the best quality of care in a resource-constrained environment, the VA and DOD must ensure reliable and cost-effective healthcare procurement, utilizing best practices that include the management of medical device formularies.
With federal procurement constantly changing, it is important to understand how these evolving rules affect those who wish to sell to the VA and DOD, how procurement mechanisms and channels vary by product type (i.e., medical devices vs. pharmaceuticals) and how manufacturers can gain preferred use within federal medical device formularies.
Here's a look three pieces of the puzzle:
1. VA Procurement and Distribution
The majority of VA care is delivered via its Veteran Integrated Service Networks (VISNs), which include 150 major medical centers, 1,200 community-based clinics, 50 rehabilitation centers and 135 nursing homes. Many of these facilities have resource-sharing agreements with university healthcare systems and DOD military treatment facilities, providing veterans with expanded access to quality medical devices and services.
The VA utilizes sealed bidding, negotiation and/or simplified acquisition procedures designed to promote full and open competition. Much of the VA’s healthcare procurement is based upon Federal Supply Schedule (FSS) contracts and purchased through the Medical Surgical Prime Vendor (MSPV) program—a “just-in-time” distribution model with strategic sourcing and volume purchasing.
Pricing is established using FSS contracts, standardized and national contract vehicles established by the National Acquisition Center (NAC) and Strategic Acquisition Center (SAC), VISN/local agreements, competitive MSPV blanket purchase agreements and through each prime vendor’s commercial supply channels.
The VA is in the process of updating the MSPV purchasing model, referred to as MSPV 2.0, to allow for a wider range of formulary offerings. MSPV 2.0 is a multi-office effort from NAC, SAC and the Veterans Health Administration (VHA). It will go into effect by March 2020, with expectations that it will exceed 20,000 products. Under this program, the SAC will award new prime vendor contracts to an undetermined number of companies—the target award date for these new contracts is November/December 2019. The VHA is responsible for developing the actual formulary of products that will be offered under MSPV 2.0.
In April 2019, the VHA issued BPA solicitations for 25 categories of products. Using the tiered cascading model of review, they will determine the supplier(s) for all product categories. The same products will not be awarded to multiple vendors; however, similar products will be.
2. DOD Procurement and Distribution
The DOD healthcare network includes 55 military treatment facilities, 375 military medical clinics and 250 military dental clinics. Like the VA, DOD procures medical equipment and supplies via a mandatory-use prime vendor program. Unlike the VA, however, the DOD prime vendor program is managed through a separate contract vehicle called the Distribution and Pricing Agreement (DAPA).
DAPA establishes the selling price for healthcare-related products and authorizes the Defense Logistics Agency Support to distribute DAPA products to the military. The two types of DAPAs are 1) Medical/Surgical – primarily for consumables that are nonmedical equipment items; and 2) Medical Equipment – for durable, repairable and portable medical equipment.
While many of the products on DAPA are also on the VA FSS, there is no direct correlation between the two, and a DAPA does not require an FSS contract to be in place. Currently, there are more than 120,000 items on DAPA.
3. Opportunity for Medical Device Manufacturers
Finally, manufacturers seeking to sell to VA and DOD purchasers often assume that having an FSS contract in place serves as a sufficient mechanism for access; however, the government has mandatory ordering with regard to sources of supply, and there are numerous vehicles above FSS contracts.
Companies need to understand the full scope of VA and DOD access considerations and strategically advocate for themselves. In a multisource market, it is important to remain price competitive, whereas in a single-source scenario it helps to understand the government’s procurement protocol and remove as many steps in that process as possible.
The federal market offers meaningful direct revenue and tremendous spillover exposure but should be approached strategically and effectively.
Cheryl Nagowski is the senior director of federal markets for D2 Consulting. Hannah Zerphey is a Managing Member of Orlaithe.