Dive Brief:
- The U.S. Defense Logistics Agency (DLA) and the Department of Veterans Affairs signed an agreement this week to centralize their medical supply procurement processes, according to a press release.
- The purpose of the deal is to improve veterans care while reducing pharmaceutical, radiology, imaging and electronic cataloging contract costs between the two agencies. «In the 21st century, an ad hoc supply chain is not sufficient,» VA Secretary Robert Wilkie said in the release.
- The agreement creates a centralized ordering system and will give the VA access to «DLA Troop Support’s worldwide procurement system for medical and surgical items, cleaning supplies and equipment, construction materials and equipment, and other supplies,» according to a VA press release.
The DLA has recently emphasized its work to improve care and streamline costs by focusing on its medical procurement practices and contracts. In a news post from May 2019, the agency claimed it saved service members over $1 billion in generic prescription drug costs through a contract negotiation program since 2013.
Accoording to a statement from Jason Wray, DLA Medical’s national contracts integrated supply team chief, the Pharmaceutical National Contracts program pools generic drug requirements from DLA’s customers and leverages the bulk order to negotiate lower prices on five-year contracts.
This process, often referred to as category management or central purchasing, is a common procurement practice in private sector healthcare supply chains as well.
Amazon’s entry into the healthcare space, through Amazon Business and its acquisition of PillPack, has begun to disrupt the B2B medical sales market with its direct to consumer product marketplace. Amazon Business has already done over $1 billion in sales in its first year. As a result, procurement functions have grown increasingly interested in ways to streamline costs and make inbound delivery more efficient by bundling order categories and exploring more direct service models of their own.
The VA was included in the DLA contracts program as well and worked with the agency to establish a Joint National Contracts program, which the Office of Management and Budget recently named a «Best-In-Class» practice.
«If the National Contracts program can work for generic pharmaceuticals, perhaps it can work for other medical items,» Wray said in May. «It would be interesting to see if the program can be replicated elsewhere. I’d also like to see our program hit a $2 billion milestone, or perhaps another National Contracts program reach $1 billion in cost avoidance.»
It would seem this week’s medical procurement agreement between the two agencies is another step towards this goal. Neither agency provided estimates on predicted cost savings at the time of this reporting.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.
