U.S. Capitol Building in Washington, D.C.

Engaging the federal marketplace

Authored by Jeff Clayton and Jenny McElhenny

As life sciences companies evaluate different avenues for growth, many are considering the federal marketplace. Expanding into the federal marketplace requires different considerations than expanding into new geographies or product lines. This Q&A addresses some of those considerations and issues.

Why is the federal market important for life sciences companies?

The federal market represents a significant business opportunity. The Department of Veterans Affairs (VA) Federal Supply Schedule (FSS) Big Four - the VA, Department of Defense (DOD), Public Health Service (PHS), and Coast Guard - represent over 20 million lives, including a large over 65 population. Even more important, the federal market covers our active duty and retired military service members, who deserve access to the best and most technologically advanced drugs, biologics, devices, equipment and other medical treatments. Additionally, a majority of doctors and other healthcare professionals are trained or work in VA/DoD facilities at some point in their careers. These individuals have influence beyond the federal market, and providing them with the opportunity to access life sciences companies’ products in any setting can have far-reaching impacts.

Also important to note, it is a statutory requirement for some drugs and biologics to be sold through the VA FSS program.

Who are the major players in the federal marketplace?

The two largest buyers of pharmaceuticals, medical equipment, and healthcare services in the federal marketplace are the  VA and the DOD.

The Veterans Health Administration (VHA) serves more than 9 million lives and is separated into 18 Veterans Integrated Services Networks (VISNs). This system has approximately 150 VA Medical Centers and 1,200 Community Based Outpatient Clinics. In terms of pharmaceuticals, the VA has a national formulary called the Veterans Affairs National Formulary (VANF).  Understanding the formulary, the process the VA employs for establishing criteria for use for pharmaceuticals, the broader contracting and pricing landscape, and how it can impact uptake in this market (for drugs and other treatments) is vitally important to a company’s success. Key influencers include:

  • Medical Advisory Panel (MAP)
  • National Pharmacy & Therapeutics (P&T) Committee
  • VA Office of Inspector General (OIG)
  • Pharmacy Benefit Management (PBM)
  • VISN Pharmacist Executives (VPE)
  • VA National Acquisition Center (NAC) and Strategic Acquisition Center (SAC)

The Defense Health Agency (DHA) serves more than 9.5 million lives and provides high quality health services to Military Health System (MHS) beneficiaries across two channels of delivery: direct care via Military Treatment Facilities (MTF) or contracted care via TRICARE. They also provide prescription distribution through MTFs, Mail Order Pharmacy and TRICARE retail. The system has a 3-tier national formulary called the DOD Uniform Formulary, with two sub formularies (Basic Core Formulary and Extended Core Formulary). These sub formularies control MTF pharmacy stocking. Key influencers include:

  • Beneficiary Advisory Panel (BAP)
  • Clinical Assessment Committee (CAC)
  • Defense Logistics Agency (DLA)
  • Pharmacoeconomic Center (PEC)
  • Pharmacy & Therapeutics (P&T) Committee
  • Value Assessment Committee (VAC)

What is Federal Market Access?

Federal Market Access is the process that life sciences companies employ to ensure their therapies are made available to patients in the federal markets and to ensure that they are reimbursed. It has become increasingly important over the last decade due to high-tech, and often expensive, therapies coming to market, and pressure on healthcare systems and the government to manage costs. Providing access to federal beneficiaries will mean navigating unique market access limitations, particularly at product launch. It is important to consider differences between commercial and federal health systems, statutory requirements, rules of engagement for account managers, patient assistance program limitations and unique distribution models. Understanding the landscape, contracting vehicles, pricing requirements, distribution channels and other unique requirements and limitations is vitally important for life sciences companies operating in this space.

What is the VA FSS program and why does it matter?

The VA Federal Supply Schedule (FSS) program is a multiple award contracts program directed and managed by the General Services Administration (GSA), with delegated authority to VA. The program is awarded and maintained under a coordinated effort of VA PBM, VA NAC, and VA OIG. The VA FSS program provides access for Federal Government Agencies to medical equipment, supplies, pharmaceuticals and services, supporting the healthcare requirements of the VA and other government agencies. The VA manages 9 Schedules, with access to over 1 million products and services. The program supports warfighters and veterans, providing them with access to the therapies they need.

VA FSS agreements are indefinite delivery, indefinite quantity contracts, with a robust solicitation process and lengthy timelines. Although FSS sales may represent a small portion of a manufacturer’s overall customer base, companies should understand the importance and potential impacts of the FSS program to their commercial organization. It is important to note that drugs covered by the Veteran’s Health Care Act of 1992 must be listed on the VA FSS pharmaceutical schedule (65 I B). Additionally, there are unique pricing and disclosure requirements, subcontracting requirements, and contract terms and conditions that contract holders must be aware of and capable of managing.

What are some important considerations when operating in the federal market?

These markets are generally managed by the VA and DOD and are subject to a number of regulations beyond what is standard in the commercial market. There is an operational impact that comes with doing business in the federal market, starting with the unique contracting, pricing, compliance and reporting requirements that come into play. Not only do these requirements add some level of operational lift, they can also present a number of risks that need to be addressed throughout the lifecycle of a contract with the Federal Government and throughout the lifecycle of a product.

The federal market is a high control integrated network, with unique distribution channels and models (for instance, the Prime Vendor Program). Patient assistance programs are often difficult to operationalize for federal beneficiaries, and contracting, pricing and distribution for unique products with specific requirements or product combinations can be hard to navigate. Pricing is also strictly regulated, with a minimum 24 percent discount for certain drugs and biologics being sold through VA FSS contracts. Other pricing requirements (for generic drugs, medical devices and other offerings) are less certain, and as a result, are sometimes even more difficult to understand and manage effectively.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Baker Tilly has helped numerous life sciences companies access and navigate the federal market and has supported clients in market access strategies for VA and DOD, new drug launch government program establishment, FSS administration, renewal, negotiation, pricing and contracting, and through OIG audits and disclosures. We have experience in all sectors of the industry – including medical device, biotechnology, and pharmaceutical. Our clients include both private and publicly held companies ranging from start-ups to multi-billion dollar companies, as well as many companies with international operations.     

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