VA FSS FAQs — Public Law (PL) 102-585, Veterans Health Care Act (VHCA) of 1992

United States Department of Veterans Affairs

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Public Law 102-585

What is Public Law 102-585?
Does Public Law 102-585 apply to me?
How does Public Law 102-585 affect my VA Federal Supply Schedule contract?
What is a covered drug?
What kind of price discounts do the "Big 4" agencies receive under Public Law 102-585?
What is the Federal Ceiling Price (FCP)?
Who is eligible for Big 4 pricing?
What is single pricing vs. dual pricing?
How is the Federal Ceiling Price (FCP) calculated?
Does this process apply to items added to my FSS contract after contract award?
How do I comply with Public Law 102-585?
What if I do not comply with the requirements of Public Law 102-585?
When do price changes go into effect?
When can I delete a covered drug from my contract?
What about covered drugs obtained through a specialty pharmacy or specialty distributor?
Is the ICE Health Service Corps (formerly the Div. of Immigration Health Services – DIHS) within the Department of Homeland Security (DHS) eligible to access Federal Ceiling Prices (FCPs)?
How will TRICARE mandatory rebates, paid in fiscal 2012 for 2008 & 2009 TRICARE Retail Pharmacy Network (TRRx or T-Pharm) utilization, impact 2012 annual non-FAMP reporting?

1. What is Public Law 102-585?

Public Law 102-585 is the Veterans Health Care Act of 1992; this law was enacted on November 4, 1992. Section 603 of this law applies to the prices certain agencies pay for pharmaceuticals. The Secretary of Veterans Affairs has the statutory responsibility for implementing and enforcing Section 603 of this act.

2. Does Public Law 102-585 apply to me?

Public Law 102-585 only applies to SIN 42-2A single source innovator, multiple source innovator, biological and insulin pharmaceutical products, under Schedule 65IB, Drugs, Pharmaceuticals, & Hematology Related Products.

3. How does Public Law 102-585 affect my VA Federal Supply Schedule contract?

One of the main purposes of the Veterans Healthcare Act is to control the prices of covered drugs purchased by certain Government agencies, including the Department of Veterans Affairs, the Department of Defense, Public Health Service/Indian Health Service, and the Coast Guard. Each of these “Big 4” agencies receives special pricing discounts on pharmaceuticals in accordance with this Public Law.

4. What is a covered drug?

Covered drugs include:

Sole source and multi-source innovator drugs for which a prescription is required and is marketed under an original New Drug Application (NDA) approved by the Food & Drug Administration (FDA);
Biologics marketed under a FDA license; and
“Generics” that are marketed under an NDA (commonly referred to as authorized generics).

5. What kind of price discounts do the "Big 4" agencies receive under Public Law 102-585?

Big 4 pricing for covered drugs is capped at no greater than 76% of the non-Federal Average Manufacturer Price (non-FAMP); therefore, under Public Law 102-585, Big 4 customers must receive at least a 24% discount from the net prices wholesalers pay to manufacturers for covered drugs. This is the Federal Ceiling Price.

6. What is the Federal Ceiling Price (FCP)?

The FCP is the maximum price that a manufacturer may charge for a covered drug sold to the Big 4 Federal entities engaged in providing healthcare services — VA, DoD, PHS/HIS, and the Coast Guard. The FCP is effective for a calendar year, or that portion of a calendar year in which the covered drug is marketed.

7. Who is eligible for Big 4 pricing?

The Big 4 include the Department of Veteran Affairs (VA), Department of Defense (DoD), Public Health Services (PHS), including Indian Health Services, and the Coast Guard. State Veteran Homes who have a sharing agreement with the VA and have elected options 2, 3 or 4 (VHA IL 10-99-001), and the division of Immigration Health Services that purchases drugs for use in their clinics.

8. What is single pricing vs. dual pricing?

The Federal Ceiling Price (FCP) only applies to Big 4 sales; therefore, manufacturers may offer one price to all FSS customers (FCP or lower), or they can have offer one price for the Big 4 (FCP or lower) and a negotiated FSS price that applies to all other Government agencies.

9. How is the Federal Ceiling Price (FCP) calculated?

The calculation for the FCP is: (annual non-FAMP x 0.76) — any additional discounts. The Industrial Funding Fee is not included in the FCP.

10. Does this process apply to items added to my FSS contract after contract award?

Yes, all manufacturers must calculate and report the non-Federal Average Manufacturer Prices (non-FAMP) and the Federal Ceiling Price (FCP) for all new covered drugs after one full calendar quarter or sales. The permanent calculated FCP will remain effective until annual pricing updates become effective the following year. No annual non-FAMP report will be required for new drugs that do not have at least one full calendar quarter of sales.

11. How do I comply with Public Law 102-585?

To comply with PL requirements, manufactures must enter in a Master Agreement (MA) and a Pharmaceutical Pricing Agreement (PPA) with the VA, whereby they agree to offer all covered drugs to the Big 4 on their VA Federal Supply Schedule contracts at no more than their calculated Federal Ceiling Price. The MA is Evergreen and the terms and conditions are the same for every manufacturer. The PPA Addendum A must be revised annually.

12. What if I do not comply with the requirements of Public Law 102-585?

If a manufacturer does not comply with the requirements of Public Law 102-585, it is not only precluded from selling to the Big 4, but it is also prevented from receiving payment for the purchase of covered drugs from buyers under Medicaid, or any entities that receive funders under the Public Health Service Act.

13. When do price changes go into effect?

The Pharmaceutical Pricing Agreement and modification to update contract pricing go in to effect January 1 of each year. See the Public Law 102-585, Veterans Health Care Act of 1992 page for additional information on the annual Public Law process.

14. When can I delete a covered drug from my contract?

For non-transferred covered drugs, they can only be deleted from contract upon confirmation that all stock has been completely exhausted from the supply chain and/or inventory (i.e. upon expiration of the last lot manufactured, or upon confirmation that all wholesalers have a “0” count of the drug with all of their distribution centers). Transferred covered drugs can be deleted from the transferor’s contract once they are added to the transferee’s contract. See the 10/15/1997 Dear Manufacturer Letter issued by the Office of General Counsel for additional information in this regard. However, if the transferee does not obtain the right to market the transferor’s labeler code, then the transferor’s labeler code NDCs must remain on the transferor’s contract.

15. What about covered drugs obtained through a specialty pharmacy or specialty distributor?

If a drug manufacturer has a covered drug that is routed outside of the Pharmaceutical Prime Vendor programs through either a specialty pharmacy or specialty distributor, this information must be communicated to the VA’s PBM and FSS offices so that the appropriate contracting actions can be taken by the VA. Please note that the drug manufacturer will be responsible for ensuring that specialty pharmacy/specialty distributor complies with the terms and conditions of the manufacturer’s FSS contract when filling prescriptions/accepting and filling orders.

16. Is the ICE Health Service Corps (formerly the Div. of Immigration Health Services – DIHS) within the Department of Homeland Security (DHS) eligible to access Federal Ceiling Prices (FCPs)?

After reviewing information from DHS/ICE, on April 25, 2012, VA’s General Counsel issued a memo to VA’s Office of Acquisitions, Logistics, and Construction, stating that DHS/ICE’s Health Service Corps is not entitled to receive FCPs on covered drug orders. They no longer are considered to be a functional element of the Public Health Service (PHS or HRSA), one of the statutory beneficiaries of FCPs. (DHS is not a statutory beneficiary of FCPs.)

17. How will TRICARE mandatory rebates, paid in fiscal 2012 for 2008 & 2009 TRICARE Retail Pharmacy Network (TRRx or T-Pharm) utilization, impact 2012 annual non-FAMP reporting?

Based on VA’s October 2009 “Dear Manufacturer Letter” and 2009 posted “FAQ” answers, VA’s P.L. 102-585 § 603, Policy Group has concluded that TRRx utilization data from all calendar quarters of 2008 and calendar quarters 1 & 2 of 2009 should have no place in 2012 non-FAMP computations. In other words, this old TRRx utilization need not be excluded from 2012 non-FAMP-eligible sales totals.