Conclusions

VA and DOD have made important progress, particularly this past year, in their collaborative efforts to jointly procure drugs to help control spiraling prescription drug costs. While their joint procurement efforts have been impressive, to date the departments have largely targeted generic drugs, which make up less than 10 percent of their combined expenditures. More dramatic cost reductions could be realized through procurements of high-cost brand name drugs, although in doing so, it may be more complex and time-consuming to garner the necessary clinical support and provider acceptance on therapeutic interchangeability. Nonetheless, DOD’s greatly expanded retiree drug benefit, and both departments’ developing formularies should provide added joint procurement opportunities for such drugs. Also, the departments’ have demonstrated that flexible approaches to developing joint solicitations can take into account differences in their health systems while still maximizing drug discounts. In our view, their joint activities could be further enhanced by periodically conferring with private managed care pharmacy experts and reporting to the Congress on their joint procurement activities. In the same regard, VA and DOD have also made progress in their efforts to conduct a CMOP pilot. The sooner the pilot proves feasible, the sooner DOD can begin to realize the financial and quality of care benefits associated with the transfer of its refill workload. Also, to help build on the departments’ progress with joint drug procurement and distribution activities, we recommend that the Secretaries of Defense and Veterans Affairs ensure that the Acting Assistant Secretary of Defense (Health Affairs) and VA’s Under Secretary for Health take the following actions:   as part of the departments’ annual reporting to the Congress on resource sharing activities, provide information on ongoing and planned joint procurements—including the volume and expenditures relative to the departments’ top-ranking drug classes and total drug expenditures and the consequent annual cost avoidance—as well as on progress toward implementing a CMOP pilot;   consider the benefits of periodically conferring with private, managed care pharmacy experts to exchange information, experiences, and lessons learned that could be relevant to the departments’ joint drug procurement activities; and   work together to move ahead promptly on the CMOP pilot and develop an interagency agreement governing the pilot’s operation, including actions needed to provide added CMOP capacity should DOD decide to use the CMOPs systemwide.
What GAO Found

The Department of Veterans Affairs (VA) and the Department of Defense (DOD) have made important progress, particularly during the past year, in their efforts to jointly procure drugs to help control spiraling prescription drug costs. Although their collaborative efforts have been impressive, the two agencies have largely targeted generic drugs, which comprise less than 10 percent of their combined expenditures. More dramatic cost reductions could be achieved through procurements of high-cost brand-name drugs, although doing so can be more complex and time consuming to garner the necessary clinical support and provider acceptance on therapeutic interchangeability. Nonetheless, DOD's greatly expanded retiree drug benefit and the formularies being developed by both agencies should provide added joint procurement opportunities for such drugs. Also, VA and DOD have shown that flexible approaches to developing joint solicitations can take into account differences in their health systems while still maximizing drug discounts. In GAO's view, their joint activities could be further enhanced by periodically conferring with private managed care pharmacy experts and reporting to Congress on their joint procurement activities. Top management at DOD and VA need to stay focused on their joint procurement and distribution activities as leadership changes continue at the two agencies. VA and DOD have also made progress in their efforts to conduct a consolidated mail outpatient pharmacy pilot. The sooner the pilot proves feasible, the sooner DOD can begin to realize the financial and quality of care benefits associated with the transfer of its refill workload.