APPENDIX COMMITTEE ON VETERANS' AFFAIRS, Washington, DC, March 15, 2000. Hon. TOGO D. WEST, JR. DEAR MR. SECRETARY: It has come to my attention that the Office of Personnel Management (OPM) has advised the Department of Veterans Affairs (DVA) that, in OPM's opinion, the Special Agents' Mutual Benefits Association (SAMBA) should be allowed to access the Federal Supply Schedule Class 65, Drugs, Pharmaceuticals and Hematology Related Products, because SAMBA contracts with OPM (under Contract No. CS 1074) as a fee for service health benefits plan participating in the Federal Employee Health Benefits Program (FEHBP). Based on my initial review of this matter, I have grave reservations about the legitimacy of OPM's position. It appears that there are significant legal, regulatory, administrative and policy issues, all of which OPM has resolved in favor of allowing SAMBA to access the FSS, that I believe require further analysis and review. Indeed, the actions suggested by OPM could be contrary not only to the governing statutes and regulations, but also to the spirit and intent of the relevant Schedule. It is my further understanding that under Federal Acquisition Regulation 51.102(c)(3), your office must provide specific approval for SAMBA to access the relevant Schedule. In light of the concerns addressed above, I request that your office withhold any such approval until such time as all relevant issues related to SAMBA's request-and OMB's apparent decision to approve it—have been resolved satisfactorily, and all parties who have an interest in the resolution of this matter have had the opportunity to present their views to all concerned. Indeed, this may be the type of issue that would be appropriately addressed through the notice and comment procedure typically followed under the Administrative Procedure Act. Please advise at your earliest convenience, how you intend to proceed on this matter. Sincerely, CLIFF STEARNS, Chairman, (39) Hon. JACOB LEW, COMMITTEE ON VETERANS' AFFAIRS, Director, Office of Management and Budget, DEAR MR. LEW: On Tuesday, July 25, 2000 the VA Subcommittee Health will hold a hearing to examine VA pharmaceutical procurement policy. We are specifically interested in recent testimony by Mr. William Flynn of the Office of Personnel Management, before the Subcommittee on Civil Service, Committee on Government Reform and Oversight, concerning a current effort within the Administration to add a new participant from the Federal Employee Health Benefits Plan, the Special Agents Mutual Benefit Association, to the Federal Supply Schedule drug pricing program, administered by VA. The Subcommittee needs to understand the rationale for this proposal, its legal basis, and any policy implications for future price increases for drugs procured by VA for care of its own patients. You or your designee are invited to testify on these matters and your role in this proposal. The hearing is scheduled for 10 a.m. in room 334 of the Cannon House Office Building. You will be permitted up to five minutes for your opening statement. You are requested to furnish 150 copies of written testimony to Angela Jeansome at 338 Cannon House Office Building by noon on Friday, July 21. Committee rules provide for the timely receipt of written testimony, and witnesses failing to submit written testimony by the deadline may not be called to testify. To reduce costs and to facilitate the inclusion of the written testimony in the printed record of the hearing and on the Committee's web page, please be in accordance with the enclosed submission requirements. Sincerely, CLIFF STEARNS, Chairman, Statement of Congressman Luis Gutierrez VA Pharmaceutical Procurement Policy Thank you, Mr. Chairman. I am pleased that we are here today to discuss the issue of pharmaceutical procurement and I thank the witnesses for appearing here today. As we know, the Department of Veterans Affairs currently purchases pharmaceutical drugs and medical supplies for VA patients through the Federal Supply Schedule, a program for volume buying that allows VA to receive these goods at a below-average price per item. VA medical centers are the most significant federal purchasers of pharmaceuticals through the Federal Supply Schedule. By buying in bulk and negotiating the Federal Supply Schedule with drug companies, this procedure keeps costs to a minimum for veterans who rely on VA facilities for their health care needs. Recently, the Office of Personnel Management authorized the Special Agents Mutual Benefit Association, a Federal Employee Health Benefits Plan provider, access to the Federal Supply Schedule for pharmaceuticals. By doing so, OPM instructed the Department of Veterans Affairs to permit approximately 16,000 federal employees, under certain restrictions, access to pharmaceuticals at reduced cost. The goal of this pilot program is to determine if a prescription drug prices similar to those specified in the Federal Supply Schedule can be established to provide pharmacy benefits to millions of federal employees. I strongly support the goal of this endeavor. I am deeply concerned about the rising costs of pharmaceuticals in recent years. For example, prescription drug premiums for federal employees have increased by thirty percent in the past three years. Some Americans, most of them senior citizens, are now traveling to Canada to purchase their medications because they can buy prescription drugs there for a price that, on average, is forty percent lower than what they are charged in the United States. I fear that our veterans population will be among the hardest hit by the increasing costs of drugs. We must remember that the vast majority of veterans who rely on the VA for their health care do so because they have nowhere else to turn, and these men and women will face great hardship if they are forced to pay more for the medicines they need. I strongly support efforts to ensure that our nation's veterans continue to have access to pharmaceuticals at affordable prices. However, I believe that all of us on this committee, while we work to assure that veterans continue to receive affordable prescription drugs, must commit ourselves to the critical goal that every American has access to affordable prescription drugs. The rising cost of drugs, and the unwillingness of this Congress to take real, credible action to give the American people life-saving or life-sustaining drugs at reasonable prices, constitutes a national crisis. I urge my colleagues, all advocates for veterans and-- most importantly--the pharmaceutical industry, to take action to protect our veterans' ability to receive these drugs, while assuring that every other American has this right. Thank you, Mr. Chairman. Statement of Representative Helen Chenoweth-Hage Hearing on VA Pharmaceutical Procurement Policy I'd like to thank Chairman Stearns for holding today's important hearing. I am glad that my good friend from Florida is taking the lead in protecting the integrity of our health care system, both for our veterans and for the general public. As you know, the Office of Personnel Management (OPM) recently launched a two-year demonstration pilot program. Mr. William Flynn, who is one of our panelists today, testified before the Government Reform Subcommittee on Civil Service on June 13 about the demonstration program. Mr. Flynn testified that a framework of agreement was reached under which the Special Agents Mutual Benefits Association (SAMBA) – a health plan for law enforcement agents and their dependents -- would have access to the Federal Supply Schedule (FSS) for prescription drug coverage. It is the position of OPM - according to Mr. Flynn -- to "get maximum savings on the drugs that we purchase on behalf of our members." Mr. Chairman, while I applaud OPM for making an attempt to address the very serious concern of the tremendous growth in prescription drug prices, I believe that this particular program is short sighted and could lead to unintended consequences. Allowing special opportunities for drug benefits to one federal constituency represented by SAMBA over another would create an incentive for pharmaceutical producers to adjust by raising drug prices for other constituencies that do not have the same beneficial coverage. This is evidenced by previous experience. For instance, in 1990, Congress passed the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508) to expand the Medicaid best price program. Instead of lowering prices, pharmaceutical companies responded to the tactic by either eliminating their discounts or raising their rates to other market segments. Mr. Chairman, this program raises a number of serious questions about what could happen to drug prices for our veterans. The agency which procures prescription drugs for our veterans, the Veteran's Administration, is the same agency which procures prescription drugs for this pilot program for SAMBA. If pharmaceutical companies respond to this program by eliminating discounts, or raising prices, then our veterans as well as many other groups covered by the FEHBP could suffer serious cost increases for their drugs. Mr. Chairman, I do believe that we need to address the massive increase in drug prices, and the potential costs that this creates for the average consumer as well as the taxpayer. I do believe that pharmaceutical companies are unfairly taking advantage of the American consumer - by drastically increasing the costs of drugs in the United States while at the same time severely discounting those same drugs in other countries. We need to address this problem in a reasonable and workable manner. Mr. Chairman, rather than implementing an uncertain and experimental pilot program to |