Major savings available in VA budget, if we look
© Getty Images

When Congress returns from its extended August recess for an abbreviated September work period, it will have precious little time to wrap up work on and pass a massive package of veterans health and benefits legislation that has been stalled nearly a year. While there are minor disagreements among Members and Veterans Service Organizations alike over various provisions within this large collection of bills, the main sticking point with this package, as with most bills these days, is money. How can we, then, pay for all the good things we need to do for our veterans?

While there are numerous ways to pay for veterans’ legislation that are controversial, even unpalatable to veteran advocates, there are many more reforms to programs and benefits that are or should be relatively non-controversial. These should be pursued either in the remainder of this Congress or in the next one.

ADVERTISEMENT

For starters, the Department of Veterans Affairs (VA) significantly overpays for both pharmaceuticals and medical equipment. While prices for the former are negotiated in bulk at a national level, the latter are often bought region by region, and sometimes hospital by hospital. This in no way takes advantage of economies of scale that the nation’s largest integrated health system is capable of leveraging. Having individual VA hospitals negotiate their own contracts for medical supplies and equipment creates enormous redundancies and waste in the system. Without question, this takes valuable time away from front-line medical facility managers and health care providers who need to be focused on improving wait times, finding efficiencies that do not compromise veteran health, and serving their veteran patients in the best ways possible.

As for pharmaceutical purchases, the recent saga with the outrageous pricing scheme of new Hepatitis C virus (HCV) treatments and the dramatic subsequent discounting of those prices for the VA after congressional pressure and outrage should serve as an example of how savings can be found elsewhere in the VA and even the Department of Defense (DOD) drug formularies.

When Gilead Sciences initially priced their new HCV cure at nearly $100,000 for a 2-3 month course of treatment, the financial burden of treating veterans with HCV threatened to - and nearly did - blow the VA’s budget, not to mention those of many state health care programs. When their competitor AbbVie came out with a similar new treatment, the new price with competition on the market was hardly a deal at only a few thousand dollars lower. It wasn’t until political pressure from Congress came into the equation that these two companies cut their prices in half and the burden on VA’s budget began to become slightly less eye-popping. However what really brought the prices for these drugs more in line with reason and rationality was the introduction of yet a third treatment option from yet another competitor, Merck. Now the VA pays less than one-quarter of what drug manufacturers were originally asking it to pay per treatment, and those companies are still raking in billions in profits.

Meanwhile, the VA is still paying Gilead, AbbVie, and Merck tens of thousands of dollars for these drugs for each and every veteran who needs the three-month treatment. While we may think we have struck the best deal and that these drug companies who operate and enjoy their billions of dollars in profit under the blanket of freedom and liberty that American veterans provide them, think again. In countries like India and Egypt, these same drugs are offered by some of these same companies for one-twentieth of the VA’s “rock bottom deal” price.

Perhaps an important lesson to be learned from this episode is that drug companies can stand to cut the VA some serious slack in their pricing, thereby alleviating the budget pressures that are currently forcing policy makers and veterans advocates to battle over and choose between paying for GI Bill recipients’ full housing stipends or supporting all caregivers of gravely wounded and incapacitated veterans.

An important new development in the pharmaceutical industry that may give VA even more budget flexibility is the emergence of biosimilars, which are analogous to generic drugs and often cost significantly less when used instead of their much more expensive alternatives. Seriously renegotiating rip-off drug prices along with the adoption and use of “generics” for biologics could save the VA hundreds of billions of dollars and ensure the long-term financial stability of the VA health care system.

While it is imperative that Congress fully funds the VA’s budget, it is also critical that they scrutinize expenditures more closely, find efficiencies, and trim excess where possible.

Michael Joseph Little, ABH2(AW/SW), USN (IRR) is director of legislative affairs for the Association of the United States Navy.

The views expressed by authors are their own and not the views of The Hill.