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MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:

We are pleased to present the views of the Disabled American Veterans (DAV) to the Subcommittee to assist in the examination of the Department of Veterans Affairs (VA) pharmaceutical procurement policy.

DAV was founded in 1920 and chartered by Congress in 1932 as the primary advocate for America’s service-connected disabled veterans, their dependents and survivors. Since its inception, DAV has been dedicated to one, single purpose: building better lives for our nation’s disabled veterans, their dependents and survivors.

As an organization of more than one million service-connected disabled veterans and an auxiliary, DAV ensures that disabled veterans and their families are adequately cared for by using the voice of our membership to participate in the governmental and political processes that affect the well-being of veterans. We work closely with the Congress to aid in the formulation of legislation that will best serve veterans; and we work in partnership with the VA to find optimum ways to serve the needs of America’s veterans.

DAV’s National Legislative Department in Washington, D.C. promotes reasonable, responsible legislation to assist disabled veterans, their families, their widowed spouses, and orphans. As the principle advocate for America’s 2.3 million disabled veterans—a role we take very seriously—it is not only our policy to seek reasonable, responsible legislation, but to help disabled veterans keep the benefits they have earned by spilled blood, prolonged illness, and loss of mental well-being as a result of their military service.

While serving in our country’s armed forces, veterans not only temporarily relinquish their liberty to allow the rest of us to continue to enjoy ours, they lose income and other civilian economic and educational opportunities, endure the rigors and hardships of military service, risk the hazards of war and other dangerous military missions, and suffer injury and death. Of course, the heaviest burdens are borne by those who are disabled—those who sacrifice their health—during service. However, all who put aside civilian education and career opportunities to serve in our nation’s defense make noble sacrifices.

Our nation’s commitment to its veterans has endured periods of economic crisis and has evolved through various military conflicts to the existing integrated system of veterans’ programs. Together, these programs form a benefit system that provides support and addresses the needs of veterans and their dependents in a comprehensive manner.

The breadth of support among the citizens of this country for veterans is fully demonstrated by public opinion data. As our government makes decisions about the future of its programs, it must keep in mind the special nature of veterans’ benefits and pay attention to the desires of the American people to honor the nation’s pledge to care for its veterans.

Despite this strong commitment to veterans, it sometimes fades from the consciousness of some of our elected officials. In recent years, veterans’ champions in the government have been fewer, and veterans themselves have had to fight to secure their programs. Over the last two decades, veterans’ programs and services have been cut by more than $27 billion (including spending cuts to be realized through fiscal year 2004). These spending cuts have taken place even though the cost of veterans’ benefits has been held to a virtual straight line, while expenditures for certain other federal programs were increasing at an extraordinary pace. Veterans’ programs are not a cause of this country’s fiscal problems; nor are veterans a major cause of the backlogs in the VA’s claims processing system. Yet veterans’ benefits and health care services are being attacked from every direction—the Administration, Congress, the VA, commissions, and so-called think tanks.

In May of 1992, former Congressman Sonny Montgomery introduced H.R. 5193. The intent of the bill was to improve the delivery of health-care services to eligible veterans and to clarify the authority of the Secretary of Veterans Affairs. H.R. 5193 became Public Law 102-585, enacted on November 4, 1992. This bipartisan bill improved the manner by which the VA could obtain best price pharmaceuticals under the Federal Supply Schedule (FSS).

Under Title VI: drug pricing agreements –P.L. 102-585 amended Title XIX (Medicaid) of the Social Security Act to exclude the prices charged on or after October 1, 1992, for prescription drugs purchased by the VA, the Department of Defense, a State Veterans' Home receiving certain grant funds, the Indian and public health services, or certain federally funded clinics and public or private nonprofit hospitals from the calculation of best price procurement for purposes of application of Medicaid rebate agreements.

In order to receive reduced prices, the law requires covered entities to:

• Take certain steps to avoid duplicative discounts or rebates;
• Refrain from reselling such purchased drug to a person who is not a patient of such entity; and
• Permit audits of records to determine agreement compliance.
• Make covered entities liable to the manufacturer for the full amount of any reduced price if the Health and Human Services (HHS) Secretary determines agreement noncompliance on the entity's part.

Public Law 102-585 also amended Title 38, United States Code, to require agreements between the VA Secretary and covered drug manufacturers limiting the purchase price of drugs procured by the VA and certain other federal agencies. The statute provides for additional discounts for covered drugs purchased under the depot contracting system or listed on the FSS. It requires certain manufacturer reports to the secretary on drug prices. The measure authorizes the VA Secretary to audit relevant manufacturer or wholesaler records. It requires the VA Secretary to supply to the HHS Secretary the name of the manufacturer upon the execution or termination of any master agreement and, on a quarterly basis, a list of manufacturers who have entered into such agreements.

As we understand the purpose of the proposed pilot, it would determine if a schedule comparable to the FSS should be established to expand discounts to provide pharmacy benefits to the federal employee health benefit program community.

Mr. Chairman, the DAV is concerned that by expansion of the FSS, the VA would have to bear increased costs that could require either an increased appropriation of billions of dollars from Congress or the reduction of health care services to hundreds of thousands of sick and disabled veterans who rely on the VA as their sole source of health care.

As VA officials have stated on numerous occasions in the last decade, anything which increases the volume of drugs sold under FSS and subject to Public Law 102-585 pricing policy has potential to adversely affect VA pricing for pharmaceuticals. The issue here is not the provision of one FEHBP plan with access to the FSS. The perception that such an action is the beginning of a course of events that could possibly lead to all of FEHBP, Medicare and Medicaid pharmaceutical pricing being linked to FSS/Public Law 102-585 is the key issue. Simplistically, market share/outlays for these programs are already circulating in the economy. If outlays for pharmaceuticals to these programs are lowered through extension of FSS pricing, it is clear the pharmaceutical industry will move to retain profit margin through pricing strategy modifications, i.e. they will raise prices in other venues to maintain profit margins.

Years of inadequate funding—less than current service budgets and below inflation levels—combined with rising demands and fewer employees, have resulted in services that are delayed or withheld. Many veterans die before they are able to access health care.

And what is and has been the Administration’s response to all of this? "The Office of Management and Budget (OMB) will maintain sufficient oversight of the pilot to ensure that the initiative does not adversely affect the Department of Veterans Affairs and the federal budget."

I suggest a more accurate statement would be, "without the sacrifices made by veterans, we would not have the level of peace and prosperity we are enjoying today." Few citizens serve and sacrifice for the nation, but all citizens benefit from the efforts of our citizen-soldiers.

Fifty-six years ago, plans were underway for the largest allied air and sea invasion of Europe. Two years ago, the release of the blockbuster hit Saving Private Ryan graphically depicted the horrors and loss of life and limb experienced by America’s citizen-soldiers as they overcame virtually insurmountable obstacles to successfully complete their mission—to breach the beachhead defenses of a well-fortified enemy. Many who saw the movie were horrified by the images on the large screen. They left the theater praising the efforts of those brave men who stormed ashore at Normandy on June 6, 1944. More than any other movie, Saving Private Ryan has made the public aware of the horrors of war and the sacrifices made by those who served this great nation.

On June 25th, America marked the 50th anniversary of the beginning of the Korean War. On Thursday, July 27, we will mark the 47th anniversary of the end of America’s "forgotten war." Yet, our government’s commitment to care for those who have served in the armed forces continues to be eroded—veterans are no longer a national priority. The now famous words of President Lincoln, inscribed on the VA central office building—"to care for him who shall have borne the battle and for his widow and his orphan"—no longer retain their true meaning. The bottom line is that service-connected disabled veterans, including 100% service-connected disabled combat veterans, are not receiving the medical care, services and benefits they are eligible for.

We are concerned that this pilot will increase the cost of pharmaceuticals purchased by the VA and will result in diminished health care for sick and disabled veterans. We are not satisfied with the Administration’s statement that OMB will provide sufficient oversight to ensure that the VA is not adversely impacted. Sick and disabled veterans must not be held hostage to the whims of the Administration and pharmaceutical companies. They must not experience further diminution of health care services.

This concludes my statement. Thank you for permitting us to present our views regarding this most important issue and its effects on health care for the nation’s wartime disabled veterans and their families.

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