The Department of Veterans Affairs (VA) recently announced a fundamental shift in policy that will now require manufacturers to list Veterans Health Care Act (VHCA) covered drugs (i.e., innovators) on Federal Supply Schedule (FSS) contracts, even where the country of origin of the covered drug is a non-designated country under the Trade Agreements Act (TAA). The VA has set rigorous deadlines that require manufacturers to act on the new policy almost immediately, as described below.

New policy: The VA’s new policy is a major departure from its prior policy, under which covered drugs that are TAA non-compliant could not be listed on an FSS contract. The VA’s most recent guidance, in the form of a post on the agency’s website, provides that the agency is “now requiring that all covered drugs, regardless of county of substantial transformation, be available on a 65 I B FSS contract.” This means that VA is now accepting covered drugs that were previously excluded due to their TAA non-compliant nature.

After several years of consideration, the VA has determined that its contracting officers have the authority to issue non-availability determinations under the TAA that will allow the VA to list TAA non-compliant covered drugs on FSS contracts. The VA provides two factors that will support a non-availability determination:

  1. information provided by the manufacturer that neither the offered covered drug nor similar or like items are TAA compliant; and
  2. the fact that the offered product is a covered drug under the VHCA and, accordingly, under 38 U.S.C. § 8126 (a)(1), the manufacturer is required to make the product available for procurement on its FSS contract.

Requirements under new policy: Notably, VA is requiring manufacturers to list TAA non-compliant covered drugs on their FSS contracts and has indicated that manufacturers with FSS contracts must submit a Request for Modification to add these products. Moreover, companies that do not have an FSS contract, because their only covered drugs are TAA non-compliant, must enter into an Interim Agreement with VA, so their covered drugs can be listed for sale to the Government pending negotiation of an FSS contract.

To implement the new TAA policy, as well as update a variety of other FSS terms and conditions, the VA has issued a lengthy FSS contract mass modification. Manufacturers should have received the mass modification from the VA on April 19, 2016; however, it can also be found here (under Mass Modification 0004, Schedule 65 I B).

Deadlines: The VA has set extremely ambitious deadlines by which manufacturers must comply with this new policy. The VA has announced the following key dates:

  • April 26, 2016 – deadline to submit Non-FAMP information for TAA non-compliant covered drugs, if the company has not already been submitting Non-FAMPs for those products;
  • May 6, 2016 – deadline for signed mass modifications, requests for modification to add TAA non-compliant covered drugs, and Interim Agreements;
  • June 6, 2016 – date by which all TAA non-compliant drugs must be on an FSS contract or Interim Agreement.