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United States Government Accountability Office: 
GAO: 

Report to the Ranking Member, Committee on Homeland Security and 
Governmental Affairs, U.S. Senate: 

April 2013: 

Prescription Drugs: 

Comparison of DOD and VA Direct Purchase Prices: 

GAO-13-358: 

GAO Highlights: 

Highlights of GAO-13-358, a report to the Ranking Member, Committee on 
Homeland Security and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

In fiscal year 2012, DOD and VA spent a combined $11.8 billion to 
purchase drugs on behalf of about 18.5 million beneficiaries. Both 
agencies purchase drugs directly from manufacturers via prime vendors-—
intermediaries that provide the drugs at a discount off the lowest 
price that would otherwise be available. The agencies dispense these 
drugs to beneficiaries through their medical facilities and 
pharmacies, including their mail order pharmacies. 

GAO was asked to compare prices paid for prescription drugs across 
federal programs. This report describes direct purchase prices paid by 
DOD and VA for a sample of prescription drugs. GAO will compare drug 
prices paid using other approaches and by other federal programs in 
future work. Using prime vendor data provided by these agencies for 
the first quarter of 2012, GAO selected a sample of high-utilization 
and high-expenditure drugs important to both DOD and VA and compared 
average unit prices paid by these agencies for those drugs. The sample 
contained 43 brand-name and 40 generic drugs and accounted for 37 
percent of DOD utilization, 32 percent of DOD expenditures, 28 percent 
of VA utilization, and 35 percent of VA expenditures for directly 
purchased drugs in that quarter. GAO calculated average unit prices by 
dividing total expenditures by total utilization for each drug, the 
entire sample, and the subsets of brand-name and generic drugs. GAO 
also compared DOD and VA average unit prices to the FSS and Big Four 
prices for each drug. GAO interviewed DOD and VA officials about their 
drug purchasing approaches and factors affecting the prices they are 
able to obtain. 

What GAO Found: 

When GAO compared prices paid by the Department of Defense (DOD) and 
the Department of Veterans Affairs (VA) for a sample of 83 drugs 
purchased in the first calendar quarter of 2012, DOD’s average unit 
price for the entire sample was 31.8 percent ($0.11 per unit) higher 
than VA’s average price, and DOD’s average unit price for the subset 
of 40 generic drugs was 66.6 percent ($0.04 per unit) higher than VA’s 
average price. However, VA’s average unit price for the subset of 43 
brand-name drugs was 136.9 percent ($1.01 per unit) higher than DOD’s 
average price. These results were consistent with each agency 
obtaining better prices on the type of drugs that made up the majority 
of its utilization: generic drugs accounted for 83 percent of VA’s 
utilization of the sample drugs and brand-name drugs accounted for 54 
percent of DOD’s utilization of the sample drugs. DOD officials told 
GAO that in certain circumstances they are able to obtain competitive 
prices for brand-name drugs-—even below the prices for generic 
equivalents—-and therefore will often preferentially purchase brand-
name drugs. 

At the individual drug level, DOD paid higher average unit prices than 
VA for 32 of the 40 generic drugs and for 23 of the 43 brand-name 
drugs in the sample, while VA paid higher average unit prices for the 
remaining 8 generic drugs and 20 brand-name drugs. In nearly every 
case, substantially higher prices paid by one agency were correlated 
with substantially lower utilization by that agency. Specifically, for 
10 of the 11 drugs for which one agency paid more than 100 percent 
above the price paid by the other agency, the agency that paid a 
substantially higher price also had substantially lower utilization. 
However, even when one agency paid a substantially higher price than 
the other, in all 11 cases both agencies paid less than the highest of 
the Federal Supply Schedule (FSS) prices available to all direct 
federal purchasers or the Big Four prices available to the four 
largest government purchasers. Additionally, in most cases (9 out of 
11 drugs) both agencies paid less than the lowest of these prices. The 
lower prices obtained by one agency may be due to factors such as 
differences in the agencies’ formulary design and prescription 
practices, price and rebate negotiations with manufacturers that may 
not be available more broadly to the other agency, and differences in 
utilization practices between the agencies based on differences in 
their beneficiary populations. 

DOD and VA face continued challenges in controlling drug costs. While 
the prescription drug market is complex and there are many factors 
affecting the prices DOD and VA are able to obtain for directly 
purchased drugs, differences in prices paid for specific drugs may 
provide insights into opportunities for each agency to obtain 
additional savings on at least some of the drugs they purchase. 

In commenting on a draft of this report, DOD generally agreed with 
GAO’s findings and described additional factors that may contribute to 
differences in prices paid by DOD and VA. VA expressed concerns with 
the content of the report. VA suggested additional analyses and 
highlighted the impact of program design on each agency’s use of 
prescription drugs. GAO maintains that its analyses have value in 
identifying opportunities for savings and the report acknowledges the 
limitations involved with estimating potential cost savings in this 
complex area. DOD and VA also provided technical comments that GAO 
incorporated as appropriate. 

View [hyperlink, http://www.gao.gov/products/GAO-13-358]. For more 
information, contact John E. Dicken at (202) 512-7114 or 
dickenj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD Paid a Higher Average Direct Purchase Price Than VA across the 
Entire Sample but Paid Less Than VA for Brand-Name Drugs: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Relative Prices Paid by DOD and VA for the 83 Drugs in 
the Direct Purchase Sample: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: Comments from the Department of Veterans Affairs: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Table: 

Table 1: Direct Purchase Drug Sample, First Calendar Quarter of 2012: 

Figures: 

Figure 1: DOD and VA Relative Average Unit Prices for Drugs in the 
Sample, First Quarter of 2012: 

Figure 2: Number of Drugs in the Sample for Which DOD or VA Paid the 
Higher Average Unit Price, First Quarter of 2012: 

Figure 3: Drugs for Which DOD Paid a Higher Average Unit Price Than 
VA, First Calendar Quarter of 2012: 

Figure 4: Drugs for Which VA Paid a Higher Average Unit Price Than 
DOD, First Calendar Quarter of 2012: 

Abbreviations: 

CMOP: Consolidated Mail Outpatient Pharmacy: 

DOD: Department of Defense: 

FSS: Federal Supply Schedule: 

HCPCS: Healthcare Common Procedure Coding System: 

MTF: military treatment facility: 

NCPDP: National Council for Prescription Drug Programs: 

NDA: new drug application: 

NDC: national drug code: 

TMOP: TRICARE Mail Order Pharmacy: 

VA: Department of Veterans Affairs: 

[End of section] 

April 19, 2013: 

The Honorable Tom Coburn, M.D. 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Dear Dr. Coburn: 

The Department of Defense (DOD) and Department of Veterans Affairs 
(VA) are major federal purchasers of prescription drugs. In fiscal 
year 2012, the departments spent a combined $11.8 billion to purchase 
drugs on behalf of approximately 18.5 million beneficiaries.[Footnote 
1] In fiscal year 2011, the departments' expenditures--totaling about 
$11.3 billion--amounted to about 13 percent of all federal drug 
expenditures.[Footnote 2] As we previously reported, DOD and VA face 
continued challenges in controlling drug costs and need to make drug 
savings a priority.[Footnote 3] 

One method used by DOD and VA to pay for prescription drugs on behalf 
of their beneficiaries is the direct purchase approach. In this 
approach, the program purchases drugs directly from manufacturers--
through intermediaries known as prime vendors[Footnote 4]--and 
dispenses them to beneficiaries through their own medical facilities 
and pharmacies.[Footnote 5] DOD and VA have access to certain federal 
pricing arrangements for these direct purchases, including Federal 
Supply Schedule (FSS) prices--prices available to all direct federal 
purchasers--and Big Four prices--prices available to the four largest 
federal purchasers.[Footnote 6] In addition, the prime vendors used by 
DOD and VA for these purchases provide a fixed percentage discount off 
the lowest price (e.g., the FSS or Big Four price) otherwise available 
for each drug. Direct purchase drug prices are generally not subject 
to intermediary markups from a wholesaler or other distributor. 

You requested that we compare prices paid for prescription drugs 
across federal programs. In this report, we describe direct purchase 
prices paid by DOD and VA for a sample of prescription drugs. We will 
compare drug prices paid using other approaches and by other federal 
programs including Medicare and Medicaid in future work. 

In order to compare direct purchase prices paid by DOD and VA for a 
sample of prescription drugs, we selected a sample of drugs important 
to both agencies and compared unit prices paid by each agency for 
those drugs. The sample included the top 50 brand-name and top 50 
generic drugs based on combined utilization ranks and combined 
expenditure ranks for DOD and VA in the first calendar quarter of 
2012.[Footnote 7] After accounting for overlap between the high-
utilization and high-expenditure drugs, the final sample contained 43 
brand-name drugs and 40 generic drugs and included 37.0 percent of DOD 
utilization, 31.7 percent of DOD expenditures, 27.7 percent of VA 
utilization, and 34.8 percent of VA expenditures for directly 
purchased prescription drugs. We calculated average unit prices paid 
by DOD and VA by dividing total expenditures by total utilization for: 
each drug; the entire sample; the subset of brand-name drugs; and the 
subset of generic drugs. In order to maintain the confidentiality of 
prices for individual drugs, in each case we converted from absolute 
prices to relative prices by assigning 100.0 to the lowest price and 
determining the higher price as a percentage above the lowest price. 
We compared the average unit prices paid by DOD and VA to the FSS and 
Big Four prices available to these agencies. Finally, we determined 
the maximum potential savings that might have been obtained if each 
agency had been able to obtain the lower of the DOD and VA average 
unit prices for each of the 83 drugs in the sample. The results of our 
analyses are limited to the 83 high-utilization and high-expenditure 
drugs in our sample for the first calendar quarter of 2012 and are not 
necessarily applicable across all drugs. We also interviewed DOD and 
VA officials about drug purchasing approaches they use and factors 
affecting the prices they are able to obtain. See appendix I for 
additional details on our methodology and a list of the drugs in the 
sample. See the Related GAO Products list for other GAO work on DOD 
and VA drug programs. 

Data were received from DOD in June 2012 and from VA in July 2012. We 
reviewed agency data for reasonableness and consistency, including 
screening for outlier prices and examining possible reasons for 
inconsistencies between the data sources. We also reviewed 
documentation and talked to data providers about steps they take to 
ensure data reliability, but did not confirm the accuracy of the 
underlying data. We conducted this performance audit from April 2012 
through April 2013 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

Background: 

In fiscal year 2012, VA provided prescription drug coverage to about 
8.8 million eligible veterans primarily through its medical centers 
and Consolidated Mail Outpatient Pharmacy (CMOP).[Footnote 8] VA 
primarily uses the direct purchase approach to acquire drugs directly 
from manufacturers for distribution through its facilities. These 
purchases are usually made under contract with a prime vendor that 
provides the drugs at a fixed percentage discount off the lowest price 
otherwise available for each drug. VA's drug prices are generally 
below wholesale prices provided to commercial buyers and do not 
include costs for storage, overhead, or dispensing. VA also has access 
to federal pricing arrangements and other discounts to help control 
drug spending, including the following: 

* Federal Supply Schedule (FSS) prices: These prices are available to 
all direct federal purchasers and are intended to be no more than the 
prices manufacturers charge their most-favored nonfederal customers 
under comparable terms and conditions. 

* Big Four prices: These prices are available to DOD, VA, the Public 
Health Service, and the U.S. Coast Guard. By law, these prices are 24 
percent lower than nonfederal average manufacturer prices.[Footnote 9] 

* VA national contracts: These contracts provide additional pricing 
concessions in return for commitment to potential vendors, resulting 
in pricing lower than FSS. The VA national contracts program is a 
separate contract vehicle from the FSS contract program.[Footnote 10] 

In fiscal year 2012, VA's prescription drug spending totaled about 
$4.2 billion, according to VA officials.[Footnote 11] 

In fiscal year 2012, DOD provided prescription drug coverage to about 
9.7 million active-duty and retired military personnel, their 
dependents, and others through its military treatment facilities 
(MTF), the TRICARE Mail Order Pharmacy (TMOP), and retail pharmacies. 
[Footnote 12] As with VA, DOD has access to FSS and Big Four prices 
and uses the direct purchase approach to buy drugs at a discount 
through a prime vendor for distribution through its MTFs and TMOP. 
Therefore, DOD's direct purchase drug prices are also generally below 
wholesale prices provided to commercial buyers and do not include 
costs for storage, overhead, or dispensing.[Footnote 13] In fiscal 
year 2012, DOD's prescription drug spending totaled about $7.6 
billion, according to DOD officials.[Footnote 14] 

Both DOD and VA use prescription drug formularies to help control 
prescription drug costs.[Footnote 15] In our November 2012 report on 
DOD and VA health care, agency officials told us that some of the 
differences in the agencies' formularies are due to differences in the 
structure of their health care systems.[Footnote 16] For example, DOD 
covers prescriptions written by both military and civilian providers, 
and DOD officials previously reported that, as a result, the 
department needs to have a broad formulary to account for differences 
in prescribing practices among different providers.[Footnote 17] In 
contrast, VA primarily covers medications for eligible beneficiaries 
through prescriptions written by its own providers. As VA officials 
reported, this allows VA to have more direct control over the 
medications that are prescribed to its patient population. Both 
agencies provide access to nonformulary medications determined by a 
physician to be clinically necessary. 

DOD Paid a Higher Average Direct Purchase Price Than VA across the 
Entire Sample but Paid Less Than VA for Brand-Name Drugs: 

DOD paid a higher average unit price than VA across the entire sample 
of 83 drugs and for the subset of generic drugs, but paid a lower 
average price than VA for the subset of brand-name drugs. 
Specifically, DOD's average unit price for the entire sample was 31.8 
percent higher than VA's average price, and DOD's average unit price 
for the subset of 40 generic drugs was 66.6 percent higher than VA's 
average price. However, VA's average unit price for the subset of 43 
brand-name drugs was 136.9 percent higher than DOD's average price. 
(See figure 1.) DOD paid an average of $0.11 per unit more than VA 
across the entire sample of 83 drugs and an average of $0.04 per unit 
more than VA for the generic drugs in our sample, while VA paid an 
average of $1.01 per unit more than DOD for the brand-name drugs in 
our sample.[Footnote 18] These results were consistent with each 
agency obtaining better prices on the type of drugs that made up the 
majority of its utilization: generic drugs accounted for the majority 
(83 percent) of VA's utilization of drugs in the sample for the first 
quarter of 2012, and brand-name drugs accounted for the majority (54 
percent) of DOD's utilization of the sample drugs during the same 
period. DOD officials told us that in certain circumstances they are 
able to obtain competitive prices for brand-name drugs--even below the 
prices for generic equivalents--and therefore will often 
preferentially purchase brand-name drugs.[Footnote 19] 

Figure 1: DOD and VA Relative Average Unit Prices for Drugs in the 
Sample, First Quarter of 2012: 

[Refer to PDF for image: vertical bar graph] 

Price comparison: Entire direct purchase sample; 
DOD relative price: $131.80; 
VA relative price: $100.00. 

Price comparison: Generic drugs; 
DOD relative price: $166.60; 
VA relative price: $100.00. 

Price comparison: Brand-name drugs; 
DOD relative price: $100.00; 
VA relative price: $236.90. 

Source: GAO analysis of Department of Defense (DOD), Department of 
Veterans Affairs (VA), and Truven Health Analytics data. 

Note: The Truven Health Analytics data used were Red Book data. 

[End of figure] 

When we examined the prices paid for the individual brand-name drugs 
in our sample, DOD paid higher average unit prices than VA for 23 of 
the 43 drugs (see figure 2).[Footnote 20] VA paid higher average unit 
prices for the remaining 20 brand-name drugs. DOD also paid a higher 
average price than VA for a majority of the generic drugs in our 
sample. Specifically, DOD paid a higher price for 32 of the 40 generic 
drugs in our sample, while VA paid a higher average price for the 
remaining 8 generic drugs. (See appendix II for details on the 
relative prices paid by DOD and VA for the 83 individual drugs in our 
sample.) 

Figure 2: Number of Drugs in the Sample for Which DOD or VA Paid the 
Higher Average Unit Price, First Quarter of 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Number of drugs for which each agency paid a higher price: 

Price comparison: Drugs for which DOD paid the higher price; 
Generic drugs: 32
Brand-name drugs: 23; 
Total: 55. 

Price comparison: Drugs for which VA paid the higher price; 
Generic drugs: 8; 
Brand-name drugs: 20; 
Total: 28. 

Source: GAO analysis of Department of Defense (DOD), Department of 
Veterans Affairs (VA), and Truven Health Analytics data. 

Notes: Of the 23 brand-name drugs for which DOD paid a higher price, 8 
were different strengths of the same brand-name drug (Synthroid). The 
Truven Health Analytics data used were Red Book data. 

[End of figure] 

In nearly every case, substantially higher prices paid by one agency 
were correlated with substantially lower utilization by that agency. 
Specifically, we found 11 drugs for which one agency paid more than 
100 percent above the price paid by the other agency. For 10 of these 
drugs, the agency that paid a substantially higher price also had 
substantially lower utilization.[Footnote 21] This may indicate that 
prices can vary based on the relative importance of a drug to a given 
agency. However, it is noteworthy that even when one agency paid a 
substantially higher price than the other, in all 11 cases both 
agencies paid less than the highest of the FSS or Big Four prices 
available to government purchasers of the drug, and in most cases (9 
out of 11 drugs) both agencies paid less than the lowest of the FSS or 
Big Four prices.[Footnote 22] 

If DOD and VA had each been able to obtain the lowest of DOD's or VA's 
average unit price for each of the 83 drugs in the sample, the maximum 
potential savings for DOD would have been about $19.1 million (7.5 
percent of DOD's spending for the drugs in the sample) in the first 
quarter of 2012 and the maximum potential savings for VA would have 
been about $13.9 million (5.1 percent of VA's spending on the drugs in 
the sample) during that same period. However, it is unlikely that this 
magnitude of savings could be achieved in practice because of the 
complexity of the prescription drug market and factors that affect the 
prices DOD and VA are able to obtain for drugs. For example, these 
savings apply only to the 83 drugs in our sample in the quantities 
purchased during the first quarter of 2012 and may not be 
representative of the savings available across all drugs in various 
calendar quarters. If either agency had purchased different drugs or 
even different quantities of the same drugs, the maximum potential 
savings could have been markedly different. Additionally, the lower 
prices obtained by one agency may be due to factors such as: 

* differences in the agencies' formulary designs and prescription 
practices--for example, DOD's broader formulary, designed to 
accommodate prescriptions written by non-DOD providers, and VA's 
greater control over prescribing, designed to allow it to steer 
utilization toward a limited number of drugs within a given 
therapeutic class;[Footnote 23] 

* differences in utilization practices between the agencies based on 
differences in their beneficiary populations;[Footnote 24] 

* price and rebate negotiations with manufacturers that may not be 
available more broadly to the other agency--as VA officials told us, 
these can include VA's national purchase contracts or temporary price 
reductions offered to VA by a manufacturer in order to increase a 
drug's market share; 

* differences between the discounts obtained from one agency's prime 
vendors through a competitive bidding process and potentially not 
available to the other agency;[Footnote 25] 

* drug shortages--DOD officials told us that insufficient quantities 
of less expensive versions of a drug may force an agency to purchase a 
more expensive version; or: 

* other factors, such as differences in purchasing authority, that may 
limit the extent to which particular discounts provided to one agency 
are available to the other agency. 

Concluding Observations: 

DOD and VA face continued challenges in controlling drug costs. Our 
findings suggest that there may be opportunities for savings with 
directly purchased drugs. DOD and VA paid different prices for the 
drugs in our sample; for 11 of the 83 drugs, one agency paid at least 
100 percent more than the other agency. DOD paid a lower average price 
for the brand-name drugs in our sample while VA paid less, on average, 
for the generic drugs and across the entire sample. Our past reports 
highlight the importance of DOD and VA controlling drug costs. While 
the prescription drug market is complex and there are many factors 
affecting the prices DOD and VA are able to obtain for directly 
purchased drugs, differences in prices paid for specific drugs may 
provide insights into opportunities for each agency to obtain 
additional savings on at least some of the drugs they purchase. 

Agency Comments and Our Evaluation: 

DOD and VA reviewed a draft of this report and provided written 
comments, which are reprinted in appendixes III and IV, respectively. 

DOD generally agreed with our methodology and findings. In addition, 
DOD noted that expressing differences between DOD and VA prices for 
the sample as percentages rather than actual dollar amounts may give 
the impression that significant dollar values are involved rather than 
a few cents or less per unit. While we clarified in the report the 
dollar amount of price differences, our findings indicated that small 
per-unit price differences may result in significant additional 
expenditures when accounting for the quantities purchased by the 
agencies. DOD also described additional factors beyond those mentioned 
in our findings that may contribute to differences in prices paid by 
DOD and VA. 

VA expressed concerns with the content of the report and suggested 
additional analyses. For example, VA suggested that analyses 
accounting for per-beneficiary costs, formulary design, utilization 
management, and the mix of drugs used for a particular disease state 
would have provided more appropriate comparisons. While we agree that 
such analyses could be useful, the scope of our work was targeted to a 
comparison of prices paid by each agency for a sample of high-
utilization and high-expenditure drugs and was not intended to capture 
all factors that can affect pharmaceutical spending. We noted the 
limitations of our results in the report, including that our results 
cannot be applied to all drugs purchased by the agencies. Further, our 
report acknowledges the limitations involved with estimating potential 
cost savings in this complex area. Nonetheless, we maintain that 
comparing unit prices paid for selected generic and brand-name drugs 
by different federal agencies has value in identifying specific drugs 
with price differences that may warrant further consideration for 
potential savings. 

VA also noted that most of its drug purchases are made through 
contracts with a prime vendor that provides a negative distribution 
fee (i.e., discount), resulting in savings to VA. We revised the 
introduction to make this information more prominent earlier in the 
report. VA agreed with our conclusion that the maximum potential 
savings provided in our findings are unlikely to be achieved and noted 
that obtaining lower prices on brand-name drugs would require shifting 
utilization away from generic drugs, potentially increasing overall 
drug costs. VA also stated that our list of factors affecting the 
prices each agency is able to obtain did not specifically include the 
ability of VA to direct utilization toward a limited number of drugs 
within a therapeutic class to achieve savings. We revised the report 
to clarify this point. 

VA also stated that, under an applicable Federal Acquisition 
Regulation (48 C.F.R. § 8.002), it was required to purchase more 
expensive versions of generic minocycline through the FSS contract 
rather than versions otherwise available. VA therefore requested that 
GAO remove the potential savings related to the purchase of this drug 
from the total projected savings in the report. However, our report 
generally reflects a number of factors (including differences in 
purchasing authority) that may limit each agency's ability to achieve 
the maximum potential savings we calculated, and it was beyond the 
scope of our report to apply these factors to each individual drug. 

DOD and VA also provided technical comments, which we incorporated as 
appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to relevant congressional committees and other interested members. The 
report also will be available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff members who made key 
contributions to this report are listed in appendix V. 

Sincerely yours, 

Signed by: 

John E. Dicken: 
Director, Health Care: 

[End of section] 

Appendix I: Scope and Methodology: 

In order to compare direct purchase prices paid by the Department of 
Defense (DOD) and Department of Veterans Affairs (VA) for prescription 
drugs, we chose a sample of drugs important to both agencies. We 
obtained prime vendor data for the first calendar quarter of 2012 for 
drugs dispensed to DOD and VA beneficiaries through the agencies' own 
medical facilities and mail order pharmacies.[Footnote 26] We excluded 
physician-administered outpatient prescription drugs and over-the-
counter drugs from our sample; we also excluded items that are not 
traditionally considered drugs such as bandages, syringes, needles, 
diabetes test strips, saline, and water for irrigation.[Footnote 27] 
We used data from Red Book to determine the brand-name or generic 
status of each drug.[Footnote 28] Utilization was determined using the 
National Council for Prescription Drug Programs (NCPDP) Billing Unit 
Standard.[Footnote 29] When calculating expenditures, we used the 
agencies' costs to purchase each drug without accounting for any 
future offsets from beneficiary copayments for those drugs.[Footnote 
30] We aggregated the utilization and expenditure data at the drug 
level (drug name, strength, and dosage form) separately for DOD and 
VA. For example, all national drug codes (NDC) corresponding to 10 mg 
tablets of Lipitor purchased by VA were aggregated and the associated 
utilization and expenditures were summed and compared to other brand-
name drugs, while NDCs corresponding to 10 mg tablets of atorvastatin 
(the generic equivalent of Lipitor) purchased by VA were aggregated 
separately and compared to other generic drugs.[Footnote 31] 

We ranked the top 100 brand-name and top 100 generic drugs separately 
for each agency on the basis of utilization and expenditures and then 
combined these rankings to determine the top brand-name and generic 
drugs that were purchased by both agencies. We excluded drugs that 
were in the top 100 for one agency but not for the other agency in 
order to focus our analysis on drugs that were important for both DOD 
and VA. For example, if a drug was 10th highest in utilization for VA 
but was not in the top 100 for DOD, that drug would not be included in 
our sample. Some drugs that were excluded from the sample appeared to 
be more appropriate for the beneficiary population of one agency than 
the other. For example, primaquine phosphate--a drug used to treat 
malaria--was the fourth-highest-expenditure generic drug for DOD but 
was not in the top 100 for VA. Some other excluded drugs were 
additional strengths of drugs that did appear in our sample. For 
example, simvastatin (80 mg tablet) was the sixth-highest-expenditure 
generic drug for VA but was not in the top 100 for DOD and thus was 
excluded from the sample. However, the 20 mg and 40 mg strengths of 
simvastatin were included in the sample. 

The drug sample was selected to include the top 50 brand-name and top 
50 generic drugs; 25 of the brand-name drugs and 25 of the generic 
drugs were selected on the basis of the combined DOD and VA 
utilization ranks, and the other 25 brand-name and 25 generic drugs 
were selected on the basis of the combined DOD and VA expenditure 
ranks. After accounting for drugs that were in both the high-
expenditure group and the high-utilization group, the final sample 
contained 43 brand-name drugs and 40 generic drugs and accounted for 
37.0 percent of DOD utilization, 31.7 percent of DOD expenditures, 
27.7 percent of VA utilization, and 34.8 percent of VA expenditures 
for directly purchased prescription drugs in the first calendar 
quarter of 2012.[Footnote 32] (See table I for a list of the drugs in 
the sample.) 

Table 1: Direct Purchase Drug Sample, First Calendar Quarter of 2012: 

43 Brand-Name drugs: 

Drug name, strength, and dosage form: Abilify (5 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 37; 
VA rank: 46; 
Rank after combining DOD and VA expenditure ranks[B]: 25. 

Drug name, strength, and dosage form: Actos (30 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 11; 
VA rank: 18; 
Rank after combining DOD and VA expenditure ranks[B]: 5. 

Drug name, strength, and dosage form: Actos (45 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 17; 
VA rank: 22; 
Rank after combining DOD and VA expenditure ranks[B]: 9. 

Drug name, strength, and dosage form: Advair Diskus 250 50 (0.25 mg/ 
actuation-0.05 mg/actuation, disk); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 5; 
VA rank: 64; 
Rank after combining DOD and VA expenditure ranks[B]: 19. 

Drug name, strength, and dosage form: Androgel (1% gel/jelly); 
Drug utilization ranking[A]: 
DOD rank: 27; 
VA rank: 71; 
Rank after combining DOD and VA utilization ranks[B]: 28; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Asacol (400 mg tablet, enteric 
coated); 
Drug utilization ranking[A]: 
DOD rank: 43; 
VA rank: 28; 
Rank after combining DOD and VA utilization ranks[B]: 15; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Atripla (600 mg-200 mg-300 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 14; 
VA rank: 4; 
Rank after combining DOD and VA expenditure ranks[B]: 3. 

Drug name, strength, and dosage form: Carafate (1 gm/10 ml suspension); 
Drug utilization ranking[A]: 
DOD rank: 44; 
VA rank: 19; 
Rank after combining DOD and VA utilization ranks[B]: 12; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Celebrex (200 mg capsule); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 4; 
VA rank: 73; 
Rank after combining DOD and VA expenditure ranks[B]: 23. 

Drug name, strength, and dosage form: Colcrys (0.6 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 33; 
VA rank: 21; 
Rank after combining DOD and VA expenditure ranks[B]: 13. 

Drug name, strength, and dosage form: Combivent (0.09 mg/1 inh-0.018 
mg/actuation, aerosol powder); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 52; 
VA rank: 3; 
Rank after combining DOD and VA expenditure ranks[B]: 15. 

Drug name, strength, and dosage form: Copaxone (20 mg/1ml device); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 26; 
VA rank: 10; 
Rank after combining DOD and VA expenditure ranks[B]: 6. 

Drug name, strength, and dosage form: Crestor (20 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 66; 
Drug utilization ranking[A]: 
VA rank: 17; 
Rank after combining DOD and VA utilization ranks[B]: 19; 
Drug expenditure ranking: 
DOD rank: 38; 
VA rank: 35; 
Rank after combining DOD and VA expenditure ranks[B]: 21. 

Drug name, strength, and dosage form: Cymbalta (30 mg capsule, delayed 
release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 31; 
VA rank: 43; 
Rank after combining DOD and VA expenditure ranks[B]: 22. 

Drug name, strength, and dosage form: Cymbalta (60 mg capsule, delayed 
release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 13; 
VA rank: 25; 
Rank after combining DOD and VA expenditure ranks[B]: 7. 

Drug name, strength, and dosage form: Gleevec (400 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 49; 
VA rank: 7; 
Rank after combining DOD and VA expenditure ranks[B]: 18. 

Drug name, strength, and dosage form: Januvia (100 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 7; 
VA rank: 48; 
Rank after combining DOD and VA expenditure ranks[B]: 15. 

Drug name, strength, and dosage form: Klor Con 10 (10 meq tablet, 
extended release); 
Drug utilization ranking[A]: 
DOD rank: 20; 
VA rank: 7; 
Rank after combining DOD and VA utilization ranks[B]: 4; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Lantus (100 units/1ml solution); 
Drug utilization ranking[A]: 
DOD rank: 84; 
VA rank: 8; 
Rank after combining DOD and VA utilization ranks[B]: 25; 
Drug expenditure ranking: 
DOD rank: 40; 
VA rank: 2; 
Rank after combining DOD and VA expenditure ranks[B]: 10. 

Drug name, strength, and dosage form: Levitra (20 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 10; 
VA rank: 60; 
Rank after combining DOD and VA expenditure ranks[B]: 20. 

Drug name, strength, and dosage form: Lidoderm (5% patch, extended 
release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 8; 
VA rank: 37; 
Rank after combining DOD and VA expenditure ranks[B]: 12. 

Drug name, strength, and dosage form: Lovaza (1 gm capsule, liquid 
filled); 
Drug utilization ranking[A]: 
DOD rank: 17; 
VA rank: 62; 
Rank after combining DOD and VA utilization ranks[B]: 16; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Namenda (10 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 42; 
VA rank: 27; 
Rank after combining DOD and VA utilization ranks[B]: 14; 
Drug expenditure ranking: 
DOD rank: 22; 
VA rank: 16; 
Rank after combining DOD and VA expenditure ranks[B]: 7. 

Drug name, strength, and dosage form: Nexium (40 mg capsule, delayed 
release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 3; 
VA rank: 39; 
Rank after combining DOD and VA expenditure ranks[B]: 10. 

Drug name, strength, and dosage form: Nitrostat (0.4 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 82; 
VA rank: 6; 
Rank after combining DOD and VA utilization ranks[B]: 21; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Periogard (0.12% liquid); 
Drug utilization ranking[A]: 
DOD rank: 1; 
VA rank: 44; 
Rank after combining DOD and VA utilization ranks[B]: 9; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Plavix (75 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 7; 
VA rank: 3; 
Rank after combining DOD and VA utilization ranks[B]: 3; 
Drug expenditure ranking: 
DOD rank: 1; 
VA rank: 1; 
Rank after combining DOD and VA expenditure ranks[B]: 1. 

Drug name, strength, and dosage form: Prevident 5000 plus (1.1% cream); 
Drug utilization ranking[A]: 
DOD rank: 4; 
VA rank: 60; 
Rank after combining DOD and VA utilization ranks[B]: 13; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Singulair (10 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 6; 
VA rank: 34; 
Rank after combining DOD and VA utilization ranks[B]: 6; 
Drug expenditure ranking: 
DOD rank: 2; 
VA rank: 17; 
Rank after combining DOD and VA expenditure ranks[B]: 4. 

Drug name, strength, and dosage form: Spiriva (18 mcg capsule); 
Drug utilization ranking[A]: 
DOD rank: 18; 
VA rank: 12; 
Rank after combining DOD and VA utilization ranks[B]: 5; 
Drug expenditure ranking: 
DOD rank: 6; 
VA rank: 6; 
Rank after combining DOD and VA expenditure ranks[B]: 2. 

Drug name, strength, and dosage form: Symbicort (160 mcg-4.5 mcg/ 1 
actuation, aerosol liquid); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 58; 
VA rank: 19; 
Rank after combining DOD and VA expenditure ranks[B]: 23. 

Drug name, strength, and dosage form: Synthroid (0.025 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 65; 
VA rank: 26; 
Rank after combining DOD and VA utilization ranks[B]: 23; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.05 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 24; 
VA rank: 16; 
Rank after combining DOD and VA utilization ranks[B]: 6; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.075 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 16; 
VA rank: 24; 
Rank after combining DOD and VA utilization ranks[B]: 6; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.088mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 40; 
VA rank: 51; 
Rank after combining DOD and VA utilization ranks[B]: 23; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.1mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 28; 
VA rank: 23; 
Rank after combining DOD and VA utilization ranks[B]: 10; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.112 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 50; 
VA rank: 43; 
Rank after combining DOD and VA utilization ranks[B]: 26; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.125 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 59; 
VA rank: 29; 
Rank after combining DOD and VA utilization ranks[B]: 21; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Synthroid (0.15 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 57; 
VA rank: 38; 
Rank after combining DOD and VA utilization ranks[B]: 27; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Thermazene (1% cream); 
Drug utilization ranking[A]: 
DOD rank: 68; 
VA rank: 15; 
Rank after combining DOD and VA utilization ranks[B]: 19; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Tricor (145 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 35; 
VA rank: 46; 
Rank after combining DOD and VA utilization ranks[B]: 18; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Truvada (200 mg-300mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 47; 
VA rank: 8; 
Rank after combining DOD and VA expenditure ranks[B]: 15. 

Drug name, strength, and dosage form: Zetia (10 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 15; 
VA rank: 65; 
Rank after combining DOD and VA utilization ranks[B]: 17; 
Drug expenditure ranking: 
DOD rank: 18; 
VA rank: 36; 
Rank after combining DOD and VA expenditure ranks[B]: 13. 

40 Generic Drugs: 

Drug name, strength, and dosage form: Amlodipine besylate (5 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 19; 
VA rank: 32; 
Rank after combining DOD and VA utilization ranks[B]: 19; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Amlodipine besylate (10 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 29; 
VA rank: 11; 
Rank after combining DOD and VA utilization ranks[B]: 14; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: APAP oxycodone (325 mg-5 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 27; 
VA rank: 23; 
Rank after combining DOD and VA utilization ranks[B]: 17; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Atenolol (25 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 30; 
VA rank: 44; 
Rank after combining DOD and VA utilization ranks[B]: 27; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Atenolol (50 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 22; 
VA rank: 37; 
Rank after combining DOD and VA utilization ranks[B]: 24; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Azithromycin (250 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 14; 
VA rank: 51; 
Rank after combining DOD and VA expenditure ranks[B]: 12. 

Drug name, strength, and dosage form: Carbidopa levodopa (25 mg-100 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 32; 
VA rank: 36; 
Rank after combining DOD and VA expenditure ranks[B]: 16. 

Drug name, strength, and dosage form: Chlorhexidine gluconate (0.12% 
liquid); 
Drug utilization ranking[A]: 
DOD rank: 17; 
VA rank: 42; 
Rank after combining DOD and VA utilization ranks[B]: 24; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Clonidine (0.3 mg/24 hr patch, 
extended release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 61; 
VA rank: 28; 
Rank after combining DOD and VA expenditure ranks[B]: 25. 

Drug name, strength, and dosage form: Cyclobenzaprine HCL (10 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 28; 
VA rank: 26; 
Rank after combining DOD and VA utilization ranks[B]: 22; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Finasteride (5 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 45; 
VA rank: 21; 
Rank after combining DOD and VA utilization ranks[B]: 26; 
Drug expenditure ranking: 
DOD rank: 16; 
VA rank: 2; 
Rank after combining DOD and VA expenditure ranks[B]: 3. 

Drug name, strength, and dosage form: Fluticasone propionate (0.05 mg/ 
actuation, spray); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 1; 
VA rank: 46; 
Rank after combining DOD and VA expenditure ranks[B]: 8. 

Drug name, strength, and dosage form: Gabapentin (300 mg capsule); 
Drug utilization ranking[A]: 
DOD rank: 11; 
VA rank: 4; 
Rank after combining DOD and VA utilization ranks[B]: 4; 
Drug expenditure ranking: 
DOD rank: 7; 
VA rank: 3; 
Rank after combining DOD and VA expenditure ranks[B]: 1. 

Drug name, strength, and dosage form: Gabapentin (600 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 18; 
VA rank: 63; 
Rank after combining DOD and VA expenditure ranks[B]: 22. 

Drug name, strength, and dosage form: Gemfibrozil (600 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 45; 
VA rank: 17; 
Rank after combining DOD and VA expenditure ranks[B]: 10. 

Drug name, strength, and dosage form: Glyburide (5 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 54; 
VA rank: 22; 
Rank after combining DOD and VA utilization ranks[B]: 28; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Lactulose (10 gm/15 ml solution); 
Drug utilization ranking[A]: 
DOD rank: 25; 
VA rank: 7; 
Rank after combining DOD and VA utilization ranks[B]: 10; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Lisinopril (10 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 16; 
VA rank: 35; 
Rank after combining DOD and VA utilization ranks[B]: 19; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Lisinopril (20 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 14; 
VA rank: 25; 
Rank after combining DOD and VA utilization ranks[B]: 13; 
Drug expenditure ranking: 
DOD rank: 41; 
VA rank: 43; 
Rank after combining DOD and VA expenditure ranks[B]: 24. 

Drug name, strength, and dosage form: Lisinopril (40 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 21; 
Rank after combining DOD and VA utilization ranks[B]: 9; 
Drug expenditure ranking: 
DOD rank: 51; 
VA rank: 12; 
Rank after combining DOD and VA expenditure ranks[B]: 11. 

Drug name, strength, and dosage form: Metformin HCL (500 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 5; 
VA rank: 10; 
Rank after combining DOD and VA utilization ranks[B]: 4; 
Drug expenditure ranking: 
DOD rank: 24; 
VA rank: 18; 
Rank after combining DOD and VA expenditure ranks[B]: 7. 

Drug name, strength, and dosage form: Metformin HCL (1000 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 13; 
VA rank: 5; 
Rank after combining DOD and VA utilization ranks[B]: 7; 
Drug expenditure ranking: 
DOD rank: 26; 
VA rank: 7; 
Rank after combining DOD and VA expenditure ranks[B]: 5. 

Drug name, strength, and dosage form: Metoprolol succinate (25 mg 
tablet, extended release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 5; 
VA rank: 62; 
Rank after combining DOD and VA expenditure ranks[B]: 15. 

Drug name, strength, and dosage form: Metoprolol succinate (50 mg 
tablet, extended release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 2; 
VA rank: 31; 
Rank after combining DOD and VA expenditure ranks[B]: 5. 

Drug name, strength, and dosage form: Metoprolol succinate (100 mg 
tablet, extended release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 3; 
VA rank: 27; 
Rank after combining DOD and VA expenditure ranks[B]: 4. 

Drug name, strength, and dosage form: Metoprolol succinate (200 mg 
tablet, extended release); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 44; 
VA rank: 21; 
Rank after combining DOD and VA expenditure ranks[B]: 12. 

Drug name, strength, and dosage form: Metoprolol tartrate (25 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 34; 
VA rank: 16; 
Rank after combining DOD and VA utilization ranks[B]: 17; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Metoprolol tartrate (50 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: 24; 
VA rank: 8; 
Rank after combining DOD and VA utilization ranks[B]: 10; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Minocycline HCL (100 mg capsule); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 48; 
VA rank: 23; 
Rank after combining DOD and VA expenditure ranks[B]: 20. 

Drug name, strength, and dosage form: Naproxen (500 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 15; 
VA rank: 36; 
Rank after combining DOD and VA utilization ranks[B]: 19; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Olanzapine (10 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 77; 
VA rank: 5; 
Rank after combining DOD and VA expenditure ranks[B]: 23. 

Drug name, strength, and dosage form: Omeprazole (20 mg capsule, 
delayed release); 
Drug utilization ranking[A]: 
DOD rank: 4; 
VA rank: 17; 
Rank after combining DOD and VA utilization ranks[B]: 8; 
Drug expenditure ranking: 
DOD rank: 6; 
VA rank: 11; 
Rank after combining DOD and VA expenditure ranks[B]: 2. 

Drug name, strength, and dosage form: Pravastatin sodium (40 mg 
tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 34; 
VA rank: 38; 
Rank after combining DOD and VA expenditure ranks[B]: 21. 

Drug name, strength, and dosage form: Ranitidine (150 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 18; 
VA rank: 15; 
Rank after combining DOD and VA utilization ranks[B]: 12; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Sertraline HCL (100 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 31; 
VA rank: 35; 
Rank after combining DOD and VA expenditure ranks[B]: 14. 

Drug name, strength, and dosage form: Simvastatin (20 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 7; 
VA rank: 40; 
Rank after combining DOD and VA utilization ranks[B]: 16; 
Drug expenditure ranking: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA expenditure ranks[B]: [Empty]. 

Drug name, strength, and dosage form: Simvastatin (40 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 12; 
VA rank: 31; 
Rank after combining DOD and VA utilization ranks[B]: 15; 
Drug expenditure ranking: 
DOD rank: 30; 
VA rank: 39; 
Rank after combining DOD and VA expenditure ranks[B]: 18. 

Drug name, strength, and dosage form: Tamsulosin HCL (0.4 mg capsule); 
Drug utilization ranking[A]: 
DOD rank: 37; 
VA rank: 20; 
Rank after combining DOD and VA utilization ranks[B]: 23; 
Drug expenditure ranking: 
DOD rank: 37; 
VA rank: 15; 
Rank after combining DOD and VA expenditure ranks[B]: 9. 

Drug name, strength, and dosage form: Tramadol HCL (50 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: 9; 
VA rank: 3; 
Rank after combining DOD and VA utilization ranks[B]: 3; 
Drug expenditure ranking: 
DOD rank: 72; 
VA rank: 20; 
Rank after combining DOD and VA expenditure ranks[B]: 26. 

Drug name, strength, and dosage form: Valacyclovir HCL (500 mg tablet); 
Drug utilization ranking[A]: 
DOD rank: [Empty]; 
VA rank: [Empty]; 
Rank after combining DOD and VA utilization ranks[B]: [Empty]; 
Drug expenditure ranking: 
DOD rank: 9; 
VA rank: 60; 
Rank after combining DOD and VA expenditure ranks[B]: 18. 

Source: GAO analysis of DOD, VA, and Truven Health Analytics data. 

Notes: The Truven Health Analytics data used were Red Book data. We 
excluded physician-administered outpatient drugs, over-the-counter 
drugs, and certain items such as bandages, syringes, needles, diabetes 
test strips, saline, and water for irrigation. Drug utilization and 
expenditures were determined by aggregating data for all national drug 
codes (NDC) corresponding to the same drug name, strength, and dosage 
form. If rankings are provided in either the utilization columns or 
the expenditure columns but not both, the drug was selected for the 
sample because combining the DOD and VA ranks placed the drug among 
the top drugs for only one of these categories. If rankings are 
provided in both the utilization columns and the expenditure columns, 
then combining the DOD and VA ranks placed the drug among the top 
drugs for both categories. 

[A] Utilization was determined on the basis of the total number of 
units purchased; units were defined on the basis of the National 
Council for Prescription Drug Programs (NCPDP) Billing Unit Standard. 
NCPDP developed the Billing Unit Standard to assist in consistent and 
accurate billing of pharmaceutical products and to standardize the 
reporting of units to the Centers for Medicare & Medicaid Services for 
rebate purposes. Generally, these standards report items in one of 
three units: each (when a product is measured in discrete units such 
as tablets, capsules, vials, or kits), milliliters (when a product is 
measured in liquid volume), and grams (when a product is measured by 
weight). The use of these standards may cause certain drugs (e.g., 
liquids) to have a higher utilization rank than they would if a 
different method had been used. 

[B] Rankings that do not appear in the combined rankings columns 
(e.g., rank 1 for combined DOD and VA utilization) corresponded to 
items such as saline that we excluded from the sample. 

[End of table] 

After selecting the sample, we calculated average unit prices paid by 
DOD and VA for all individual drugs by dividing total expenditures by 
total utilization for each drug. We also calculated average unit 
prices for the entire sample, the subset of brand-name drugs, and the 
subset of generic drugs by dividing the total expenditures for all 
relevant drugs by the total utilization of those drugs. In order to 
maintain the confidentiality of drug prices, in each case we converted 
from absolute prices to relative prices by assigning 100.0 to the 
lowest price and determining the higher price as a percentage above 
the lowest price. We compared the average unit prices obtained by DOD 
and VA for each drug to the Federal Supply Schedule (FSS) and Big Four 
prices available to these agencies.[Footnote 33] We interviewed DOD 
and VA officials about drug purchasing approaches they use and factors 
affecting the prices they are able to obtain. Finally, we determined 
the maximum potential savings that might have been obtained if each 
agency had been able to obtain the lower of the DOD and VA average 
unit prices for each of the 83 drugs in the sample. The results of our 
analyses are limited to the 83 high-utilization and high-expenditure 
drugs in our sample for the first calendar quarter of 2012 and are not 
necessarily applicable across all drugs. 

[End of section] 

Appendix II: Relative Prices Paid by DOD and VA for the 83 Drugs in 
the Direct Purchase Sample: 

Figure 3 shows the 55 drugs (out of 83 drugs in our sample) for which 
the Department of Defense (DOD) paid a higher average unit price than 
the Department of Veterans Affairs (VA) and the percentage by which 
the DOD price exceeded the VA price. Figure 4 shows the 28 drugs (out 
of 83) for which VA paid a higher average unit price than DOD and the 
percentage by which the VA price exceeded the DOD price. 

Figure 3: Drugs for Which DOD Paid a Higher Average Unit Price Than 
VA, First Calendar Quarter of 2012: 

[Refer to PDF for image: 2 horizontal bar graphs] 

Percentage (and dollar amount) by which the DOD average unit price 
exceeded the VA unit price: 

Brand-name drugs (n = 23): 

Colcrys (0.6 mg tablet): 0.7%; ($0.02); 
Actos (30 mg tablet): 1.8%; ($0.09); 
Actos (45 mg tablet): 2.8%; ($0.15); 
Thermazene (1% cream): 2.8%; (less than $0.01); 
Copaxone (20 mg/1 ml device): 3.1%; ($51.02); 
Klor Con 10 (10 meq tablet, extended release): 5.4%; ($0.01); 
Lantus (100 units/1ml solution): 12.9%; ($0.31); 
Levitra (20 mg tablet): 16.7%; ($1.36); 
Abilify (5 mg tablet): 21%; ($1.82); 
Combivent (0.09 mg/1 inh-0.018 mg/actuation, aerosol powder): 30.3%; 
($0.90); 
Synthroid (0.025 mg tablet): 50.3%; ($0.03); 
Synthroid (0.088 mg tablet): 54.9%; ($0.04); 
Synthroid (0.05 mg tablet): 55.2%; ($0.04); 
Synthroid (0.075 mg tablet): 56.6%; ($0.04); 
Nitrostat (0.4 mg tablet): 58.9%; ($0.02); 
Synthroid (0.1 mg tablet): 61.3%; ($0.04); 
Synthroid (0.112 mg tablet): 62.6%; ($0.04); 
Synthroid (0.125 mg tablet): 66.1%; ($0.04); 
Synthroid (0.15 mg tablet): 68.6%; ($0.05); 
Spiriva (18 mcg capsule): 72.7%; ($1.22); 
Crestor (20 mg tablet): 152.1%; ($1.19); 
Tricor (145 mg tablet): 157.7%; ($0.82); 
Symbicort (160 mcg - 4.5 mcg/1 actuation, aerosol liquid): 175.3%; 
($4.90). 

Generic Drugs (n = 32): 
        
Finasteride (5 mg tablet): 0.9%; (less than $0.01); 
Clonidine (0.3 mg/24 hr patch, extended release): 1.5%; ($0.38); 
Metoprolol tartrate (50 mg tablet): 1.5%; (less than $0.01); 
Simvastatin (40 mg tablet): 2%; (less than $0.01); 
Fluticasone propionate(0.05 mg/actuation, spray): 5.7%; ($0.02); 
Chlorhexidine gluconate (0.12% liquid): 6%; (less than $0.01); 
Azithromycin (250 mg tablet): 6.5%; ($0.07); 
Lisinopril (20 mg tablet): 6.8%; (less than $0.01); 
Metformin HCL (1000 mg tablet): 7.3%; (less than $0.01); 
Omeprazole (20 mg capsule, delayed release): 8.3%; ($0.01); 
Metformin HCL (500 mg tablet): 11%; ($0.01); 
Atenolol (25 mg tablet): 11.3%; (less than $0.01); 
Lisinopril (40 mg tablet): 12.7%; ($0.01); 
Naproxen (500 mg tablet): 14.9%; ($0.01); 
Tramadol HCL (50 mg tablet): 17.2%; (less than $0.01); 
Atenolol (50 mg tablet): 20.9%; (less than $0.01); 
Tamsulosin HCL (0.4 mg capsule): 21.5%; ($0.02); 
APAP oxycodone (325 mg - 5 mg tablet): 23%; ($0.01); 
Simvastatin (20 mg tablet): 24.1%; ($0.01); 
Amlodipine besylate (5 mg tablet): 25.7%; (less than $0.01); 
Gemfibrozil (600 mg tablet): 26.8%; ($0.02); 
Valacyclovir HCL (500 mg tablet): 28.4%; ($0.23); 
Sertraline HCL (100 mg tablet): 34.1%; ($0.03); 
Amlodipine besylate (10 mg tablet): 52.1%; ($0.01); 
Lisinopril (10 mg tablet): 52.3%; ($0.01); 
Glyburide (5 mg tablet): 56.9%; ($0.02); 
Gabapentin (600 mg tablet): 66.6%; ($0.09); 
Gabapentin (300 mg capsulet): 77.2%; ($0.06); 
Pravastatin sodium (40 mg tablet): 96.1%; ($0.08); 
Metoprolol tartrate (25 mg tablet): 103.1%; ($0.01); 
Carbidopa levodopa (25 mg - 100 mg tablet): 146.9%; ($0.13); 
Cyclobenzaprine HCL (10 mg tablet): 310%; ($0.05). 

Source: GAO analysis of Department of Defense (DOD), Department of 
Veterans Affairs (VA), and Truven Health Analytics data. 

Note: The Truven Health Analytics data used were Red Book data. 

[End of figure] 

Figure 4: Drugs for Which VA Paid a Higher Average Unit Price Than 
DOD, First Calendar Quarter of 2012: 

[Refer to PDF for image: 2 horizontal bar graphs] 

Percentage (and dollar amount) by which the VA average unit price 
exceeded the DOD unit price: 

Brand-name drugs (n = 20): 

Lidoderm (5% patch, extended release): 0.7%; ($0.03); 
Plavix (75 mg tablet): 0.8%; ($0.03); 
Carafate (1 gm/10ml suspension): 1%; (less than $0.01); 
Gleevec (400 mg tablet): 1.3%; ($1.19); 
Cymbalta (30 mg capsule, delayed release): 1.4%; ($0.04); 
Namenda (10 mg tablet): 1.8%; ($0.03); 
Cymbalta (60 mg capsule, delayed release): 1.9%; ($0.05); 
Lovaza (1 gm capsule, liquid filled): 2.4%; ($0.02); 
Singulair (10 mg tablet): 6.5%; ($0.15); 
Asacol (400 mg tablet, enteric coated): 7.1%; ($0.05); 
Androgel (1% gel/jelly): 10.5%; ($0.12); 
Celebrex (200 mg capsule): 11.6%; ($0.23); 
Atripla (600 mg - 200 mg - 300 mg tablet): 12.3%; ($0.47); 
Truvada (200 mg - 300 mg tablet): 31.2%; ($5.01); 
Januvia (100 mg tablet): 33.8%; ($0.73); 
Advair Diskus 250 50 (0.25 mg/actuation - 0.05 mg/actuation, disk): 
44.8%; ($0.73); 
Zetia (10 mg tablet): 133.3%; ($1.43); 
Nexium (40 mg capsule, delayed release): 502.5%; ($3.02); 
Prevident 5000 Plus (1.1% cream): 950.5%; ($0.07); 
Periogard (0.12% liquid): 1,025.7%; (less than $0.01). 
Olanzapine (10 mg tablet): 0.1%; (less than $0.01); 
Metoprolol succinate (200 mg tablet, extended release): 0.6%; (less 
than $0.01); 
Ranitidine (150 mg tablet): 2.4%; (less than $0.01); 
Metoprolol succinate (100 mg tablet, extended release): 3.4%; ($0.02); 
Metoprolol succinate (50 mg tablet, extended release): 10.3%; ($0.03); 
Metoprolol succinate (25 mg tablet, extended release): 10.7%; ($0.03); 
Lactulose (10 gm/15 ml solution): 13.9%; (less than $0.01); 
Minocycline HCL (100 mg capsule): 742.1%; ($3.48). 

Source: GAO analysis of Department of Defense (DOD), Department of 
Veterans Affairs (VA), and Truven Health Analytics data. 

Note: The Truven Health Analytics data used were Red Book data. 

[End of figure] 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Note: Page numbers in the draft report may differ from those in this 
report. 

The Assistant Secretary of Defense: 
Health Affairs
1200 Defense Pentagon: 
Washington, DC 20301-1200: 

April 1, 2013: 

Mr. John E. Dicken: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Dicken: 

This is the Department of Defense's (DoD) response to the Government 
Accountability Office (GAO) Draft Report, GA0-13.358, "Prescription 
Drugs: Comparison of DOD and VA Direct Purchase Prices," dated March 
5, 2013, (GAO Code 291040). Thank you for the opportunity to provide 
comments on the draft report. 

Overall, I generally concur with the GAO's methodology and findings of 
the audit. While the draft report does not provide any 
recommendations, I will take this opportunity to provide additional 
information to illustrate that the differences in prices as noted in 
the report are in many cases a difference of one cent or less. I 
believe this information will improve the accuracy and value of the 
final report by preventing misinterpretation of the magnitude of the 
findings and by mitigating conclusions that could be drawn out of 
context. 

A review of the actual per unit pricing differences for the drugs 
listed in Appendix II, "Relative Prices Paid by DoD and VA for the 83 
Drugs in the Direct Purchase Sample" provides a realistic context of 
these pricing differences versus the statement on page 5 of the draft 
report: "...DoD's average unit price for the subset of 40 generic 
drugs was 66.6 percent (%) higher than VA's average price." This 
percentage can give the impression of a significant dollar value which 
is clarified only in footnote #17 stating that the actual difference 
is only 4 cents per unit. Of the 32 generics that DoD paid more than 
the Department of Veterans Affairs (VA), 23 generics had a difference 
in unit cost of 2 cents or less, with 19 of the 23 differing by a cent 
or less. The perspective that one product in the chart shows a 103.1 
percent difference in price seems outrageous, until one realizes that 
the actual difference was only one cent per unit. 

There are several confounders that may contribute to very small actual 
differences in per unit pricing between DoD and VA for both the 
generics and branded pharmaceuticals in the report, including: 

* DoD's prime vendor pricing provided to GAO was all procurements 
worldwide, which included a higher cost recovery factor for shipping 
and delivery to overseas locations. Conversely, the VA has no overseas 
locations. 

* The review period of the first calendar quarter of 2012 introduces 
anomalies created by the expiration of contracts at the end of the 
calendar year with gaps in effective dates of follow-on national 
contracts. Such was the case for cyclobenzaprine with a change of 
$0.02 to $0.07 during the gap. 

* Discontinuance of Federal Supply Schedule pricing by several 
manufacturers at the end of the calendar year forced DoD to procure 
higher priced carbidopallevodopa because the contractor supporting VA 
at a lower price was unable to meet the demands of both Departments. 

* The report does not state that DoD is already identifying and 
reaching out to facilities unknowingly or inadvertently ordering 
higher priced packaging or products when a lower priced product 
exists, which will close the gap in actual per unit pricing, though 
already very small. 

The DoD and VA pharmacy programs are vastly different in structure, 
statutory parameters, and regulatory guidance. For the medications 
(primarily brand name) with large actual differences in unit cost, 
these differences arc due to differences in formulary design, 
prescribing practices, and population served. This is supported by 
GAO's observation that medications with substantially higher unit 
costs at one agency tended to have lower utilization at that agency. 

DoD continually seeks opportunities for cost savings in managing the 
very complex environment of pharmaceutical procurement as suggested in 
the report's concluding observations. In addition to the several 
examples provided above, the report acknowledges other factors that 
may contribute to the pricing differences between DoD and VA. 
Considering these factors, DoD strongly agrees that the results of 
this report cannot be extrapolated beyond the 83 drugs reviewed, and 
that it is unlikely this magnitude of savings could be achieved in 
practice due to the complexity of the prescription drug market and 
other factors that affect the prices DoD and VA are able to obtain for 
drugs. 

My points of contact on this issue are Rear Admiral (RADM) Thomas 
McGinnis (Functional) and Mr. Gunther Zimmerman (Audit Liaison). RADM 
McGinnis may be reached at (703) 681-2890, and Mr. Zimmerman may be 
reached at (703) 681-4360. 

Sincerely, 

Signed by: 

Jonathan Woodson, M.D. 

[End of section] 

Appendix IV: Comments from the Department of Veterans Affairs: 

Department of Veterans Affairs: 
Washington DC 20420 

April 2, 2013 

Mr. John E. Dicken: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Dicken: 

The Department of Veterans Affairs (VA) has reviewed the Government 
Accountability Office's (GAO) draft report, "Prescription Drugs: 
Comparison of VA and DOD Direct Purchase Prices" (GAO-13-358). VA has 
significant concerns regarding the content of this report. The 
attachment details specific information from the report that could 
lead to misinterpretation of the Veterans Health Administration's 
(VHA) prescription benefit. These comments will provide insight into 
relevant VHA data that have not been included in the report. 

VA's commitment to drug savings has been a priority for over 30 years 
and, as such, VA has achieved what is potentially the lowest cost per 
patient per year in the entire Federal Government and private sector. 

VA's primary concern is that the report focuses on the unit cost of 
medications, rather than the overall cost effectiveness of each 
Department's prescription benefit. It is VA's position that the true 
cost of providing a prescription benefit is total pharmaceutical
expenditures divided by the number of covered lives or actual unique 
users. VA requests that GAO include its average cost per unique user 
of outpatient pharmacy from fiscal years 1999 to 2012, which has only 
risen from $599 to $723. 

GAO focused only on the acquisition prices of specific drugs, and did 
not take into account the significant impact of formulary design and 
utilization management. GAO does not mention the most important factor 
in achieving cost savings — the ability of the agency to direct 
standardization to the lowest cost effective drug(s) within each 
therapeutic drug class. 

VHA purchases the majority of its pharmaceuticals through the 
pharmaceutical prime vendor (PPV) rather than directly from the 
manufacturer. VHA receives a negative distribution fee from the PPV; 
therefore, it is more cost-effective for VHA to purchase from the PPV 
as opposed to directly from the manufacturer. VA finds GAO's usage of 
"direct purchase drug prices" fails to accurately represent VHA drug 
purchase cost benefits. 

From VA's perspective, GAO's methodology for reporting maximum 
potential savings appears problematic. GAO should consider addressing 
the fact that the mix of drugs used for a specific disease state as 
well as the cost per drug is what drives cost savings. VA requests 
that GAO revisit and lower the projected maximum cost savings for VHA 
to exclude GAO's cost savings associated with brand-name drugs. 

Additionally, the Federal Acquisition Regulation (FAR) (8.002) 
requires VHA to purchase the more expensive generic minocycline on the 
Federal Supply Schedule contract. VA would be supportive of a GAO 
recommendation for regulatory changes that exempt VA from purchasing 
the higher priced drugs from the Federal Supply Schedule. VA requests 
GAO remove the savings related to the purchase of generic minocycline 
from VA's total projected savings. 

The enclosure contains general comments related to the draft report. 
VA appreciates the opportunity to comment on your draft report. 

Sincerely, 

Signed by: 
Jose D. Riojas: 
Interim Chief of Staff: 

Enclosure: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John E. Dicken, (202) 512-7114 or dickenj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Robert Copeland, Assistant Director; Zhi Boon; Karen 
Howard; Laurie Pachter; and Carmen Rivera-Lowitt. 

[End of section] 

Related GAO Products: 

DOD and VA Health Care: Medication Needs during Transitions May Not Be 
Managed for All Service Members. [hyperlink, 
http://www.gao.gov/products/GAO-13-26]. Washington, D.C.: November 2, 
2012. 

2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 
Fragmentation, Achieve Savings, and Enhance Revenue. [hyperlink, 
http://www.gao.gov/products/GAO-12-342SP]. Washington, D.C.: February 
28, 2012. 

Follow-Up on 2011 Report: Status of Actions Taken to Reduce 
Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance 
Revenue. [hyperlink, http://www.gao.gov/products/GAO-12-453SP]. 
Washington, D.C.: February 28, 2012. 

Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue. [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP]. Washington, D.C.: March 1, 
2011. 

VA Drug Formulary: Drug Review Process Is Standardized at the National 
Level, but Actions Are Needed to Ensure Timely Adjudication of 
Nonformulary Drug Requests. [hyperlink, 
http://www.gao.gov/products/GAO-10-776]. Washington, D.C.: August 31, 
2010. 

Prescription Drugs: Overview of Approaches to Control Prescription 
Drug Spending in Federal Programs. [hyperlink, 
http://www.gao.gov/products/GAO-09-819T]. Washington, D.C.: June 24, 
2009. 

Military Health Care: TRICARE Cost-Sharing Proposals Would Help Offset 
Increasing Health Care Spending, but Projected Savings Are Likely 
Overestimated. [hyperlink, http://www.gao.gov/products/GAO-07-647]. 
Washington, D.C.: May 31, 2007. 

Prescription Drugs: An Overview of Approaches to Negotiate Drug Prices 
Used by Other Countries and U.S. Private Payers and Federal Programs. 
[hyperlink, http://www.gao.gov/products/GAO-07-358T]. Washington, 
D.C.: January 11, 2007. 

[End of section] 

Footnotes: 

[1] Total DOD and VA spending includes all VA drug expenditures plus 
DOD's expenditures for drugs dispensed at DOD inpatient and clinic 
facilities as well as all outpatient prescriptions filled at the 
TRICARE Mail Order Pharmacy (TMOP), DOD pharmacies, and non-DOD retail 
pharmacies. DOD officials told us they are unable to provide spending 
totals for inpatient drugs in non-DOD facilities because costs for 
these drugs are usually bundled with other services for payment. 

[2] Total federal prescription drug expenditures for 2011 were 
obtained from the National Health Expenditures data for 2011 (the most 
recent comprehensive federal data available at the time of our 
analysis) and include spending for DOD, VA, Medicare, Medicaid, the 
Children's Health Insurance Program, Indian Health Services, and 
Maternal/Child Health. See Centers for Medicare & Medicaid Services, 
Office of the Actuary, Division of Health Statistics, NHE Web Tables, 
accessed January 17, 2013, [hyperlink, http://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html].
 

[3] See GAO, Opportunities to Reduce Potential Duplication in 
Government Programs, Save Tax Dollars, and Enhance Revenue, 
[hyperlink, http://www.gao.gov/products/GAO-11-318SP] (Washington, 
D.C.: March 1, 2011), pp. 82-87. 

[4] Both DOD and VA use a competitive bidding process to award 
contracts to one or more prime vendors for the purchase and delivery 
of drugs to the agencies' facilities. 

[5] Other purchasing approaches include retail reimbursement, in which 
DOD allows its beneficiaries to fill prescriptions in non-DOD retail 
pharmacies and then reimburses the pharmacies for the cost of the 
drugs. In some cases, VA beneficiaries can obtain drugs on a fee-for-
service basis through non-VA facilities. The retail reimbursement and 
fee-for-service payment approaches are outside the scope of this 
report. 

[6] Big Four prices are available to DOD, VA, the Public Health 
Service, and the U.S. Coast Guard. 

[7] A brand-name drug is a drug marketed under a proprietary, 
trademark-protected name. After any patent and market exclusivity for 
the brand-name drug expires, other drug companies may develop a 
generic equivalent--a similar drug that has the same active 
ingredient, strength, dosage form, route of administration, and 
intended use. We excluded physician-administered outpatient 
prescription drugs and over-the-counter drugs from our sample. We also 
excluded items that are not traditionally considered drugs such as 
bandages, syringes, needles, diabetes test strips, saline, and water 
for irrigation. 

[8] Veterans who served in active military duty and who were 
discharged or released under conditions other than dishonorable are 
generally eligible for VA health care. Reservists, National Guard 
members, and certain others may also be eligible for VA health care 
under certain conditions. In some cases, VA beneficiaries can obtain 
drugs on a fee-for-service basis through non-VA facilities. These make 
up a very small proportion of VA drug expenditures (less than 1 
percent in fiscal year 2010) and are outside the scope of this report. 

[9] See 38 U.S.C. § 8126(a)(2). The nonfederal average manufacturer 
price is the weighted average price of a single form and dosage unit 
paid by wholesalers to a manufacturer, taking into account cash 
discounts or similar price reductions. Big Four prices, in general, do 
not apply to generic drugs. 

[10] In fiscal year 2012, VA's national contract purchases totaled 
$296.8 million, or about 6 percent of total drug expenditures. 

[11] Spending is net of beneficiary copayments. 

[12] Other beneficiaries include National Guard and Reserve members, 
their families, survivors, and certain former spouses worldwide. 
TRICARE is a regionally structured program that uses contractors to 
maintain provider networks to complement health care provided at MTFs. 
Prescriptions filled by DOD beneficiaries at retail pharmacies are 
excluded from this report because they are not directly purchased by 
DOD. 

[13] However, DOD officials told us that direct purchase prices for 
drugs shipped to DOD facilities overseas include a shipping charge and 
therefore the prime vendor prices for these purchases will be slightly 
above the actual cost of the drug. 

[14] Spending is net of beneficiary copayments and postpurchase 
refunds and includes drugs dispensed at DOD inpatient and clinic 
facilities as well as all outpatient prescriptions filled through 
TMOP, DOD pharmacies, and non-DOD retail pharmacies. Of the $7.6 
billion, about $3.9 billion (51 percent) was for directly purchased 
drugs. 

[15] See GAO, Prescription Drugs: Overview of Approaches to Control 
Prescription Drug Spending in Federal Programs, [hyperlink, 
http://www.gao.gov/products/GAO-09-819T] (Washington, D.C.: June 24, 
2009), p. 9. A formulary is a list of medications, grouped by 
therapeutic class, that a health care system's providers are expected 
to use when prescribing medications. 

[16] See GAO, DOD and VA Health Care: Medication Needs during 
Transitions May Not Be Managed for All Servicemembers, [hyperlink, 
http://www.gao.gov/products/GAO-13-26] (Washington, D.C.: Nov. 2, 
2012), p. 36. 

[17] With the exception of several classes such as smoking-cessation 
and weight-loss medications, DOD makes all Food and Drug 
Administration-approved medications available. 

[18] DOD's average unit price (e.g., price per tablet, capsule, or 
milliliter) for the entire sample of 83 drugs was $0.45 while VA's 
corresponding unit price was $0.34. For the subset of generic drugs, 
DOD's average unit price was $0.10 while VA's corresponding unit price 
was $0.06. DOD's average unit price for the subset of brand-name drugs 
was $0.74 while VA's corresponding unit price was $1.75. 

[19] For example, DOD is often able to obtain competitive prices for 
brand-name drugs during the period when the generic equivalents are 
beginning to come to market. This was the case for Lipitor, which DOD 
was able to obtain at a price below its generic equivalent for several 
months after the first generic equivalent came on the market. In other 
instances, DOD is able to obtain significant price reductions for 
single-source brand-name drugs (i.e., drugs for which there is no 
generic equivalent) within a therapeutic class that includes other 
generic competitors. For example, DOD was able to obtain significant 
price reductions for Nexium because this drug is in a therapeutic 
class containing several other brand-name and generic drugs. 

[20] However, 8 of these 23 drugs were different strengths of the same 
brand-name drug: Synthroid, a thyroid supplement. 

[21] For example, VA paid 502.5 percent more than DOD, on average, for 
40 mg delayed release capsules of Nexium. This drug was the third 
highest utilization brand-name drug for DOD (which purchased more than 
26 million capsules) but only the 97th highest utilization brand-name 
drug for VA (which purchased fewer than 1 million capsules). 

[22] A given drug corresponds to one or more national drug codes 
(NDC), each representing a different labeler or different package 
size. Each NDC may have an FSS price and a Big Four price available to 
government purchasers, so there may be many such prices corresponding 
to a given drug. We compared the average unit prices paid by DOD and 
VA for each drug to all FSS and Big Four prices corresponding to the 
drug. 

[23] For additional information on DOD and VA formulary design, see 
[hyperlink, http://www.gao.gov/products/GAO-13-26]. 

[24] See Congressional Budget Office, The Department of Veterans 
Affairs' Pharmaceutical Prime Vendor Program (Washington, D.C.: Feb. 
25, 2009), p. 1. 

[25] For additional information on the DOD and VA prime vendor 
programs, see Congressional Budget Office, The Prime Vendor Program. 

[26] Direct purchases of drugs by DOD and VA are usually made under 
contract with one or more intermediaries, known as prime vendors, 
which agree to provide drugs at a fixed percentage discount off the 
lowest price otherwise available for each drug. 

[27] Because Medicare Part B primarily covers physician-administered 
outpatient drugs, we used Part B data to identify and exclude these 
drugs from our sample. However, Medicare Part B uses Healthcare Common 
Procedure Coding System (HCPCS) codes to identify drugs while DOD and 
VA use national drug codes (NDC). Therefore, we used the January 2012 
NDC-HCPCS Crosswalk Files for Medicare Part B to identify physician-
administered drugs in the DOD and VA samples so we could exclude them. 

[28] Red Book is a drug pricing compendium with information about 
prices and other characteristics of drug products, published by Truven 
Health Analytics. A brand-name drug is a drug marketed under a 
proprietary, trademark-protected name. After any patent and market 
exclusivity for the brand-name drug expires, other drug companies may 
develop a generic equivalent--a similar drug that has the same active 
ingredient, strength, dosage form, route of administration, and 
intended use. Red Book identified two drugs in our sample (Klor-Con 10 
and Thermazene) as "branded-generic" drugs. To determine whether to 
group these drugs with the brand-name subset or the generic subset, we 
identified the type of drug application submitted by the manufacturer 
for original Food and Drug Administration approval. Both drugs were 
originally approved using a new drug application (NDA). Because 
manufacturers typically submit an NDA when seeking approval for brand-
name drugs, we grouped these two drugs with the other brand-name drugs 
in our sample. 

[29] NCPDP developed the Billing Unit Standard to assist in consistent 
and accurate billing of pharmaceutical products and to standardize the 
reporting of units to the Centers for Medicare & Medicaid Services for 
rebate purposes. Generally, these standards report items in one of 
three units: each (when a product is measured in discrete units such 
as tablets, capsules, vials, or kits), milliliters (when a product is 
measured in liquid volume), and grams (when a product is measured by 
weight). The use of these standards may cause certain drugs (e.g., 
liquids) to have a higher utilization rank than they would if a 
different method had been used. 

[30] DOD officials told us that direct purchase prices for drugs 
shipped to DOD facilities overseas include a shipping charge and 
therefore the prime vendor prices for these purchases will be slightly 
above the actual cost of the drug. 

[31] NDCs are three-segment numbers that are the universal product 
identifiers for drugs for human use. The Food and Drug Administration 
assigns the first segment of the NDC, which identifies the labeler 
(i.e., the firm that manufactures, repackages, or distributes a drug). 
The labeler assigns the second and third segments. The second segment 
identifies a specific strength, dosage form, and formulation (e.g., 20 
mg capsules) and the third segment identifies package size and type 
(e.g., 100 capsules in a bottle). A drug can have multiple NDCs 
associated with it. For example, a drug made by one manufacturer, in 
one strength or dosage form, but in three package sizes would have 
three NDCs where the first and second segments are identical and the 
third segment differs for each package size. 

[32] Percentages exclude physician-administered outpatient drugs. 

[33] A given drug corresponds to one or more NDCs, each representing a 
different labeler or different package size. Each NDC may have an FSS 
price and a Big Four price available to government purchasers, so 
there may be many such prices corresponding to a given drug. We 
compared the average unit prices paid by DOD and VA for each drug to 
all FSS and Big Four prices corresponding to the drug. 

[End of section] 

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