VA Changes Course to Require Covered Drugs that are TAA Non-Compliant to be Available on the Federal Supply Schedule

By Michelle L. Butler & and Alan M. Kirschenbaum –

The Department of Veterans Affairs (VA) recently issued an Important Notice on its website regarding a change in policy with regard to covered drugs (drugs approved via new drug applications, including authorized generics, and biologics license applications) that are not compliant with the Trade Agreements Act of 1979 (TAA). Previously, the VA required that all products offered on the Federal Supply Schedule (FSS) contract be U.S.-made or substantially transformed designated country end products. However, the VA is “now requiring that all covered drugs, regardless of county of substantial transformation, be available on a 65 I B FSS contract. In other words, we now accept covered drugs that were formally [sic] excluded due to their ‘TAA non-compliant’ nature.” As described in more detail below, the VA has set forth an aggressive timeline for companies to make these covered drugs available on the FSS contract.

In making this change in policy, the VA stated that, in accordance with the Federal Acquisition Regulation, the decision has been made that contracting officers may make individual non-availability determinations regarding covered drugs so that the products can be placed on the FSS contract pursuant to:

1) information provided by the offeror that neither the offered 42-2A covered drugs nor similar or like items are manufactured in the United States or a designated country in sufficient quantity to fulfill the requirements, and

2) the statutory requirement that manufacturers shall make available for procurement on the FSS each covered drug of the manufacturer. 

The VA has provided an aggressive timeline for these TAA non-compliant covered drugs to be added to a company’s FSS contract. In addition, for a company that does not have a 65 I B contract because it does not have any TAA-compliant covered drugs, it will be required to enter into an Interim Agreement, Master Agreement, and Pharmaceutical Pricing Agreement (this process is described here), followed by an FSS contract. The schedule for implementation is as follows:

• 04/19/2016 – Notice sent out to current contractors with procedures to add the TAA non-compliant covered drugs to the FSS contract and a link to Mass Modification 0004, which includes a modification related to this issue as well as some other items.
• 04/26/2016 – Deadline for submitting NFAMP data to PBM for these covered drugs.
• 05/06/2016 – Deadline for current contractors to submit the Mass Modification and Request for Modification to add the covered drugs to the FSS contract; deadline for companies without an existing 65 I B FSS contract to submit an Interim Agreement.
• 06/06/2016 – Date by which all TAA non-compliant drugs must be on the FSS contract or an Interim Agreement.

This is a major change in policy for the VA – one that will be good news to companies that have wanted to offer their TAA non-compliant products on the FSS contract but have been unable to do so. However, the speed with which the VA is requiring this to be accomplished is surprising and may be difficult for some companies to achieve. While this change in policy is limited to covered drugs under SIN 42-2A, one wonders if the VA is working to accomplish something similar for generic drugs under SIN 42-2B or if TAA non-compliant generic drugs will continue to be excluded from award on the FSS contract.