In another sign that the largest government-owned provider is adopting more private-sector practices, the Department of Veterans Affairs healthcare system plans to move to a national drug formulary by mid-1997.
In a move that could alter the landscape for other big purchasers, the VA hopes to sign national purchasing contracts for the 150 drugs VA physicians prescribe most frequently. VA officials estimate the department spends $600 million a year on those drugs and may be able to save 10% to 20% a year.
Last month, the VA awarded the first two contracts under the formulary for treatment of peptic ulcers. One went to Zenith Goldline Pharmaceuticals for cimetidine for $3.4 million a year, saving $11.6 million, and a second went to Merck & Co. for famotidine for $28 million a year, saving $14.3 million.
Albert Patterson, the VA's chief of drug and pharmaceutical product management, said the department wants the unit to behave more like a private-sector pharmacy benefit manager.
By developing a formulary, he said, the VA can replace its sometimes fragmented drug purchasing system and use its volume-purchasing muscle to obtain greater discounts from pharmaceutical companies.
"It's obvious from our first two tries that the drug industry wants to play ball," Patterson said. "This is how they do business with other groups. They've just never had to do it with the federal government before."
Jeffrey Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers of America, said the industry group had not yet developed a position on the VA's drug purchasing, but added that "it's something we're mightily interested in."
With more than 700 facilities, the VA's healthcare system is the largest in the country. It spent $1.3 billion on pharmaceuticals in fiscal 1995.
In the past some experts have warned that when the VA uses its purchasing volume to negotiate deep discounts, medical suppliers often reduce their discounts to other big buyers.
In conjunction with the formulary, the VA is developing pharmaceutical protocols for treating some of the most prevalent diseases seen at VA healthcare facilities.
Twelve protocols are scheduled to be completed by this fall. Among them are treatments for diabetes, hypertension, congestive heart failure, depression and AIDS.
Patterson added that a formulary also can improve the consistency of the treatment of veterans' chronic conditions. A formulary can guarantee that veterans receive the same brand of drug whether their prescriptions are filled at a healthcare facility or through a mail pharmacy.
"The intent is to have seamless care for veterans" no matter what VA facility they use, Patterson said.