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Executive Summary

DoD "MEDICAL BUYING OFFICE -- EUROPE" WILL OPEN NOV. 1, Department of Defense's Helen Connor remarked at a Aug. 10 conference at the Defense Personnel Support Center in Philadelphia. Connor will be chief of the office, which will be located in the city of Pirmasens, Germany. The office eventually will consolidate all purchases of pharmaceuticals and supplies from European-based vendors for "in-theater" use. Currently, 27 DoD purchasing offices scattered across Europe purchase about $20 mil. in drugs, medical devices and supplies annually. Connor cited a number of reasons for the move, including ease of communications with vendors and faster delivery. In addition, she said, the 27 offices now handling purchases lack specialized knowledge of medical products: they now purchase everything from drugs to automobile tires to cleaning products. These offices tend to make a number of "repetitive" small purchases without long- range strategic planning of product needs or the efficiencies that might derive from larger purchases. Connor said also that Operation Desert Storm underscored the need for "on-site support" of medical needs. Advantages that the Medical Buying Office-Europe will offer to manufacturers include a centralized point of contact, simplified payment and ordering procedures, and eventually, the potential for long-range supply contracts, Connor said. Most of the Philadelphia conference's agenda focused on DoD's prime vendor program for pharmaceuticals and medical/surgical products ("The Pink Sheet" Aug. 10, T&G-14). The four regions where the program initially will be implemented have annual combined pharmaceutical purchases of more than $90 mil. The project will select one pharmaceutical distributor and one med/surg distributor per region, initially focusing on the four regions of Washington, D.C., the Virginia/North Carolina Tidewater area, San Francisco, and San Diego. Vendors for the first region, Washington, D.C., will be selected by Dec. 1, under DoD's plans. The National Institutes of Health will join with 15 military hospitals in the region purchasing products through the prime vendor system. The project also involves signing "Distribution and Pricing Agreements" with manufacturers. In addition to agreeing to allow the prime vendor to distribute its products, a manufacturer signing a DAPA will set ceiling prices for its products, which DoD expects will be generally lower than the Federal Supply Schedule, if applicable. DoD Contracting Officer William DiLauro told the conference that the prime vendor program qualifies as a "depot" and thus prices are exempted from the Medicaid drug rebate program's "best price" formula. Participating hospitals are not locked into purchasing drugs provided under DAPA agreements, but DiLauro suggested there are several reasons they will do so. DiLauro said the hospitals had requested the prime vendor program and are thus committed to making it work. The prime vendor offers convenience because hospitals can consolidate purchases and deliveries for a number of products and because the system will move to totally electronic ordering and payment procedures within two years. DiLauro said that all DAPA products will be listed in a central "computer catalog" and DoD will alert hospitals to interim discounts and other special offers from manufacturers. In the next year, DoD plans to sign volume discount contracts for about 25 drug products, DiLauro said. Those products will be selected based on quarterly utilization reports from participating hospitals. The volume contracting effort is expected to get under way in mid-1993. A Veterans Affairs Department prime vendor pilot project is underway in four areas, with Harris Wholesale, Alco and McKesson delivering drugs to a total of 33 V-A facilities ("The Pink Sheet" Oct. 21, 1991, T&G-7). Editor's Note: A report in "The Pink Sheet" Aug. 10 stating that V-A plans to initiate a prime vendor program in 1993 refers to a plan for equipment vendors.

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