Introduction: This paper was developed by the SDV-MPG as a “read ahead” for a meeting with Michael Parrish, VA Chief Acquisition Officer & Principal Executive Director, Office of Acquisition, Logistics and Construction. As a recent political appointee we wanted to provide him with a concise history of VA’s efforts and results of the Medical/Surgical Prime Vendor program.
VA’s MEDICAL/SURGICAL PRIME VENDOR PROGRAM
Service-Disabled Veteran Medical Products Group
February 2022
BACKGROUND: For approximately the past 7 years, VA has attempted to develop and manage an effective and efficient Medical/Surgical Prime Vendor (MSPV) program independent of its Federal Supply Schedule (FSS) program. The goal being to provide clinically vetted commercial products to VA medical facilities to achieve pricing consistent with volume purchasing combined with a just- in- time delivery program. A secondary goal is to reduce VA’s dependance on the use of government issued credit cards. VA has deployed several versions of MSPV, all of which have provided some benefit, but which have failed to attain VA’s original goals.
According to VA’s goals a robust MSPV program must include the following:
Clinically Driven Sourcing: Clinicians (not acquisition personnel or distributors) determine products to be used
Sufficient quantity of products on a “formulary” to be effective
Commercial products contracted at a fair and reasonable price
Just in time delivery of products by Prime Vendors
Ability to track all purchases for vendor, price, performance, timeliness and quality
Conform to all VA acquisition regulations, including VETS First
HISTORY:
LEGACY PROGRAM: Established by the National Acquisition Center (NAC) in 2010. The “formulary” was very broad as it included all products on FSS. There was no clinical input at the formulary level. Each facility established a “Commodity Committee” to determine what products would be used with heavy input from the VA’s primary Prime Vendor who had embedded service representatives at most VAMCs and controlled the distribution business at approximately 90% of VAMCs. The Prime Vendor picked a large portion of products and suppliers, based on stocking the products of their “preferred suppliers”. If VA wanted other suppliers, they were supplied open market, at higher cost to VA. The Legacy Program preceded the SCOTUS decision in Kingdomware so there were no VETS First considerations.
MSPV-NG PROGRAM: Established by the Strategic Acquisition Center (SAC) in 2015. The formulary covered approximately 8,000 items and lacked sufficient demand to support the four regional prime vendors selected (Cardinal, MedLine, Concordance and AMD). As a result, less than 50% of VA’s Med-Surg demand was fulfilled through the MSPV Program. This led to massive open market spending at high cost and hurt the Prime Vendors who could not afford to stock products for which there was little demand. There was little consideration of VETS First under MSPV-NG.
MSPV 2.0 PROGRAM: Established by the SAC in 2019, the approved list of products expanded to approximately 85,000 items determined clinically acceptable to VA. This provided for objective determination of “core items” at each VAMC based on usage, with all core items required to be stocked by the Prime Vendors. MSPV 2.0 also included significant VETS First contracting opportunities as a waiver of the “nonmanufacturing rule” was submitted and approved by SBA, allowing SDVOSBs the opportunity to provide products manufactured by other than small businesses. Unfortunately, VAMCs have been slow in providing usage data to prime vendors to establish stocking levels. Also, VA has been slow to adjust to the significant price increases in the healthcare industry. MSPV 2.0 should have yielded predictable usage, that would permit prime vendors to stock core items for just in time delivery, decrease the potential for open market spend at higher costs, ensure robust SDVOSB participation and provide for ongoing clinical input in the evaluation of new products.
DLA MSPV PILOT IN VISN 20 AND VA NORTH CHICAGO: In 2020, VA leadership collaborated with the
Department of Defense, Defense Logistics Agency (DLA) to combine the two agencies MSPV programs, even though the MSPV 2.0 supply and distribution contracts were fully awarded and ready to be implemented. As part of its plan to abandon MSPV 2.0 and transition the entire VA MSPV program to DLA which operates the DoD MSPV program, VA transitioned its facilities in VISN 20 and in North Chicago to DLA. Under the transition, VA ordering officers were required to order products through DLA’s DMLSS ordering platform, which is not web-based, and which contains only products available on DLA contract vehicles (DAPA and ECAT). This pilot demonstrated that the DLA program did not provide any clinical input into the selection of the suppliers or products and left it to the DLA Prime Vendors to work with ordering personnel to select suppliers and products based simply on their own preferences. Moreover, the DLA contracting vehicles do not mimic VA‘s MSPV supply contracts, thereby leaving large gaps in coverage. Also, VA pays DLA upon submission of an order, DLA pays the prime vendor, but no one follows up to determine whether products ordered are actually delivered. In addition, DLA requires VA to commit to provide at least $100 million in funding to DLA to pay for desired updates to DMLSS to enable DMLSS to perform the robust ordering processing and spend analysis functions to bring both agencies into the 21st Century, even though web-based commercial order processing alternatives already exist. Finally, the DLA Pilot documented that DLA had no ability or intention of implementing VETS First contracting requirements.
LESSONS LEARNED: To be effective MSPV must have:
Distributors cannot be responsible for selecting products and suppliers. This problem plagued the Legacy Program, MSPV-NG and the DLA Pilot.
Products must be selected by clinicians as validated in the VA’s MSPV 2.0 design.
Products must be available, stocked and delivered directly to VA facilities when and where needed. The DLA Pilot extensively relies on drop shipments of products as opposed to just-in-time delivery from managed inventory, fully demonstrates this imperative.
Formulary based on a sufficient number of products available. Too few means an underutilized program. Too many products cause the program to be inefficient and adds costs.
Committed volume to obtain volume purchasing power. VA has never committed volume for product suppliers or distributors.
VA facilities must communicate usage data to Prime Vendors as confirmed by the MSPV 2.0 Statement of Work.
VA must be staffed/organized and budgeted to manage the program. This is a far more urgent need than transferring funds to DLA to fund DMLSS upgrades.
VA must have real-time data to manage compliance and performance by VA staff and prime vendors. This requires a nominal investment in commercially available ordering solutions.
VA must ensure adherence by its staff and Prime Vendors to all acquisition regulations including VETS First.
VA must prohibit prime vendors from supplying their own products in response to MSPV orders.
All fees paid by and between Prime Vendors and suppliers must be disclosed and approved or capped by VA. VA needs to be able to equitably assess proposals from prime vendors.
VA must establish a formal product substitution policy.
VA must establish a formal “return of stock” policy. Currently suppliers have all the risk while VA and prime vendors have all the benefits.
As documented by recent GAO reports, VA must seek and obtain buy-in from VA field staff.
As documented by recent GAO reports, VA must implement adequate training for all VA staff engaged in MSPV transactions.