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While an FSS contract ensures a product's availability to Federal agencies, formulary status is determined independently by each agency based on mission, patient demographics, clinical, safety, and cost-effectiveness factors. |
In determining a product’s formulary status, decisionmakers in each Federal agency exchange perspectives and leverage off each other as well as utilize best practices from the commercial marketplace; however, it is important for pharmaceutical manufacturers to purposefully understand the Federal Supply Service (FSS) contract is not connected to formulary status in any Federal agency. Each agency (to include the Department of Veterans Affairs (VA), the Department of Defense (DOD), Indian Health Services (IHS), etc.) maintain their own formularies and utilize their own, unique product review processes.
In the commercial marketplace, the establishment of a contract with a payer to secure favorable product reimbursement involves the two critical factors of 1) price, usually based on a discount off of the Wholesale Acquisition Cost (WAC), and 2) the product’s tier placement on the payer’s formulary. Manufacturers balance these two components during negotiations to incentivize payers and secure access with the expectation the results will increase both utilization and overall sales. This interplay between price and formulary placement cumulating in a single agreement solidified by contract does not exist in the Federal Market.
In the Federal market, pharmaceutical manufacturers of covered drugs are required to establish and maintain a FSS contract in order to provide the Federal Government access to their product(s) per the Veterans Health Care Act of 1992. Although non-covered drugs are not statutorily required to establish FSS contracts, these contracts are the primary method of consistent acquisition and, by default, become mandatory for any meaningful utilization within this market. The General Services Administration (GSA), which holds the authority to establish FSS schedules and their associated contracts, delegates its contracting authority to the VA for the specific collection of schedules associated with pharmaceutical drugs and most medically-related equipment, supplies, and services. Despite these schedules being colloquially referred to as the “VA FSS”, the VA is actually executing the GSA mandate to establish pre-negotiated contracts on behalf of and for the benefit of all of Government – not a single agency. In its capacity as the FSS contracting authority for these schedules, the VA is the singular representative of all Ordering Agencies and, as such, focuses on what is globally applicable to all Federal agencies including a company’s compliance with the required Federal Acquisition Regulations, the delivery terms of the product to include locations and number of days between ordering and delivery, product price – particularly as it compares to contract commercial buyers, etc.
Formulary placement is intentionally excluded from these negotiations because each agency maintains its independent dominion over its agency-specific formulary and how a product may be access by its beneficiaries. Each formulary has its own purpose, structure, placement or tiering protocols, and step-throughs or prior authorizations. The evaluation process for formulary inclusion or placement is a complex balance at each agency based on clinical efficacy, safety, and cost-effectiveness balanced against the agency’s mission, patient population demographics, and budgetary priorities.
Because FSS contract issuance is not tied to formulary placement, pharmaceutical manufacturers must dedicate time to understanding the nuances of pharmacy benefit management at each agency and tailor both their approach and expectations to that specific sub-segment of the Federal market.