Fort Belvoir, VA –
The Medical supply chain’s national contracts team had less than four months to award its first contract. Except that there was no team. Not yet.
It was just starting to form when Alexander Quinones took charge of the team at the end of January 2013. Others came on board shortly before or after, from other supply chains within Defense Logistics Agency Troop Support. Most were new to the Medical supply chain and to writing long-term contracts.
Their goal was to buy generic drugs at the best possible price and ensure their availability for customers.
DLA Director Air Force Lt. Gen. Andy Busch noted soon after taking the helm of the agency that cost savings are an important part of Better Buying Power 3.0, the initiative led by the under secretary of defense for acquisition, technology and logistics, to reform all aspects of defense spending, to save taxpayer dollars.
“One of the things that I noticed in looking at the agency from the outside, prior to my arrival is we’re doing great things,” Busch said in a March 2015 director’s call, in which he noted the “fantastic” goal of saving $13.1 billion in six years set by his predecessor, Adm. Mark Harnitchek.
“But one of the things that I noticed that I think we need to improve on is the relationship between those great things we were doing and Better Buying Power,” Busch said.
“If this is an enterprise that spends $40 billion of the taxpayer money ... why is it that we can’t more clearly articulate our enterprise in terms of Better Buying Power?”
Busch’s emphasis echoed the specific challenge Harnitchek issued to the Medical supply chain three years earlier: to award its first national generic drug contract by the end of May 2013.
The national contracts team is charged with awarding long-term contracts for generic drugs. There isn’t a lot of competition when a drug first goes generic.
Quinones’ team targets high-dollar or high-volume drugs for contracts when there are multiple vendors selling them.
“It’s easiest for us if we have competition to drive that price down,” he said.
He works with the Department of Veterans Affairs and the Defense Health Agency, which oversees medical services for the military branches, to determine the requirements for a potential drug to put on contract.
“We’re leveraging the buying power of essentially the federal government,” Quinones said.
Sometimes the costs are so reduced that customers who were buying a similar drug switch, Quinones said.
“Our goal is to get really good pricing, but also to make sure we’re ensuring the availability to customers,” said Amanda Doherty, contracting officer on the national contracts team. “Customers know that they’re getting it from the same source, the same pills they get every month and it’s going to work the same way.”
The VA has been awarding contracts for generic drugs for 10 years. DLA and DHA then decided to award their own for Defense Department-priority pharmaceuticals. Now, if the VA purchases more of an item, their contracting team awards the contract and vice versa. If they’re buying the same amount, Quinones and his VA peers decide case-by-case. DLA and VA customers are mostly able to buy drugs from either agency’s contracts.
“We have a good working relationship with the VA,” said Joan Marie Grace, an acquisition specialist on the national contracts team. “They’ve been pretty open with us.”
What’s in it for industry?
Aside from pharmaceuticals available on national contracts, military treatment facilities primarily buy drugs from the VA’s Federal Supply Schedule and the DoD Distribution and Pricing Agreement. Customers looking to buy a drug go to the publicly listed FSS and choose among competing vendors offering the product at their respective price.
But when a vendor is awarded a national contract, it becomes the preferred provider of that drug and has the first chance at selling it, as long as it has the item in stock. And DLA commits to buying a minimum amount of the drugs over the period of the contract.
While DoD is a small percentage of global pharmaceutical sales, the vendor is guaranteed to move the product through these national contracts, as opposed to the FSS, Quinones said.
Anti-malaria drug savings
Production issues began with doxycycline hyclate, an antibiotic that can be used to prevent malaria, in early 2013. It became difficult to keep it in stock and prices increased, Doherty said.
Service members deploying to develop-ing countries are provided the drug as part of their packing list. There were an estimated 214 million cases of the mosquito-transmitted disease worldwide in 2015, according to the World Health Organization.
“The military needed it, regardless of the increasing prices,” Doherty said about doxycycline hyclate. “This made it a good candidate for a national contract.”
The one-year contract with four option years was awarded in December 2014 and the pricing went into effect two months later. It’s estimated to save $271 million over the course of five years for all customers, Doherty said.
The contract is now in its first option year, and the savings since February 2015 through June 2016 is $68.1 million. That savings is calculated against what DLA’s customers previously paid for the drug and the best available prices on the FSS and the Distribution and Pricing Agreement, Quinones said.
“I’m just really glad that I was given the opportunity to work on a contract for something so important to our troops like doxycycline hyclate,” Doherty said, “and to be able to ensure that the product would be available and to get them a great price.”
Quinones recalled his first thoughts after he took charge of the national contracts team and the challenge to award its first contract in less than four months.
“Nobody awards contracts of this value with this level of review in three and a half months,” he said he remembered thinking.
The team worked quickly with management, lawyers and DLA Troop Support’s staff offices during contract reviews throughout the award process.
“Everything was going through review levels for the first time,” said Danielle Delaney, a contracting officer on the team. “Who sees what? Why was it written this way? There was a lot to getting a good version down that everyone was happy with.”
There were nearly a dozen versions of the solicitation, Grace said.
They awarded that first contract a week early. It was for the generic drug omeprazole, used to treat stomach ulcers. It’s estimated to save $6.9 million over five years. Since that first one, they’ve awarded 44 more contracts.
“There’s a lot of churn,” Quinones said. “There’s new contract awards going and new options that have to be done. Our team does a great job balancing that work. There are a lot of different contracts at different stages that the team has to keep track of.”
As of June, the national contracts team has saved $246.4 million through the 45 contracts awarded.
“We call it the ‘dream team’ because we really like working with each other,” Grace said. “We were all here essentially starting from scratch. We all had a lot to learn from each other. We have a lot of skin in the game now.”