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Witness Testimony of Mr. Philip Matkovsky, Assistant Deputy Under Secretary for Health for Administrative Operations, Veterans Health Administration, Department of Veterans Affairs

Mr. Chairman, Ranking Member Kirkpatrick, and members of the Committee, thank you for the opportunity to appear before you this morning to discuss the Department of Veterans Affairs’ (VA) sourcing, procurement, and oversight of its biological implant purchases, including implant tissue.  I am joined today by

Dr. William Gunnar, National Director of Surgery, and Dr. Michael Icardi, National Director of Pathology and Laboratory Medicine Services. 

Background: Industry

Over the last 8 to 10 years, utilization of biological implants, including implant tissue, has grown significantly resulting in the doubling of value of the biomaterials market since 2004.  However, the field of biological implants continues to rapidly evolve, with new advancements in tissue fabrication, nomenclature standardization, and industry governance.

Accomplishments in Procurement

            On September 30, 2013, the Veterans Health Administration (VHA) successfully completed its transition of procurement duties from prosthetics purchasing agents.   This transition resulted in the removal of warrants from staff who were not contracting officers.  This transition also marked the final such transition for VHA – meaning that, as a rule, procurements above the micro-purchase threshold are now performed by warranted contracting officers.  In the area of prosthetics alone, VHA contracting officers have conducted 38,742 procurements throughout the first quarter of fiscal year

(FY) 2014.  Despite our ability to effectively complete this transition, it has not come without its own challenges, and our procurement and prosthetics leadership teams convene weekly to review timeliness of procurement actions to ensure Veterans receive their needed prosthetic items, to include biological implants, on a timely basis.

Directive Regarding Procurement of Prosthetics Appliances

Title 38, Section 8123, grants broad authorities to the Secretary in the procurement of prosthetics appliances.  Notwithstanding this broad authority, VHA, working with our agency’s counsel, has integrated our prosthetics purchasing authority with Federal Acquisition Regulations (FAR) and VA Acquisition Regulations (VAAR) provisions.  In this integration, the 8123 authority is employed as a statutory basis for a FAR Part 6 justification for other than full and open competition.  What this means in practice, is that if a clinician who has been trained on a particular product has felt comfortable with that product, then she can be assured that a Government procurement official will not restrict her from selecting and using a product with which she feels competent for her patients.  This application of our prosthetics authority enables our clinicians to make choices based on their medical determination of the best choice for their patients.

VHA Acknowledges Much Yet to Be Done

            In complicated systems, it is always possible to improve our management and tracking controls.  For more than 5 years, VHA has been able to track blood products to patient records using a barcode system, and similarly VHA Cardiology has been able to track implants to patient records.  In 2011, VHA’s Surgery Program implemented an implant tracking capability that also allows tracking of implants to patient records.     This foundation of detailed clinical inventory management will be leveraged to provide a single comprehensive tracking mechanism that will incorporate biological implants.  However, we acknowledge that we can significantly improve our tracking and inventory management of biological implantables, including tissue implants.  In 2013, the Food and Drug Administration (FDA), published a final rule requiring that most medical devices distributed in the United States carry a unique device identifier, or Global Unique Device Identifier Database, and that information concerning each covered device be submitted to the global unique identification database.  The rule contains staggered compliance dates.  With the advent of this new identifier, systems should be able to track a specific item and associate it with the manufacturer.  This tracking will enable improved adverse event tracking and will further enable greater automation in product recalls.  Further, complying with FDA’s Regulation of Human Cells, Tissues, and Cellular and Tissue-Based Products and Guidance for Current Good Tissue Practices, along with standards from accreditation agencies such as the American Association of Tissue Banks, Advancing Transfusion and Cellular Therapies Worldwide, and the Joint Commission, will assist in providing greater assurance over the sourcing, tracking, storage, and management of Biological implants.  

Work Team and Anticipated Recommendations

            With the more recent developments in the biological implants industry and in reaction to external audits and reviews, VHA has established a work team to identify improvements to our sourcing, management and control of biological implants.    This work team has been evaluating the processes currently employed by our facilities and has begun development of a proposed process to effectively manage our biological implants in a standard manner across all facilities.  This work team is expected to complete its review and recommendations in the third quarter of FY 2014.  We will review this team’s work product and we will then begin the process of establishing a standard protocol, to include establishment of the common clinical service to manage inventory in each of our facilities.

Whether this inventory management function can be accomplished with existing technologies already deployed in VHA or with commercially available systems will be determined at the conclusion of the work team’s analysis.  We do, however, expect to deploy automated tracking of biological implants similar to the effective automation systems we have been using for some time now for blood bank requirements.

            We have similarly charged a work team to develop a set of new, national contracts for biological implants.  This work team is in the phase of procurement known as development of requirements.  The work team is comprised of clinician leaders, logistics specialists, and prosthetics specialists.  We fully expect our new procurement packages to establish more stringent quality standards than previous schedule contracts.  We anticipate the solicitation phase of these new procurement actions to be initiated prior to the end of FY 2014.

Must Achieve Balance - Enable Physicians to Make Informed Selections

Our core mission in VHA is the delivery of timely, quality, patient centered care. Our systems must apply controls, where appropriate, to further that core mission.    We acknowledge we must continue to seek, define, and implement improvements, to our management, tracking and control of biologics items.  We are committed to making the necessary changes to our policies, practices, and systems to improve.  We must, however, ensure that our procurement system achieves balance and complies with all applicable Federal Laws and regulations while ensuring our physicians, whom we trust with the most critical decisions, are able to apply clinical discretion as they provide Veterans with individualized health care.

            Mr. Chairman, this concludes my testimony.  I appreciate the Committee’s continued interest in the health and welfare of America’s Veterans.  At this time, I am prepared to answer your questions.