The United States has been grappling with persistent commercial drug shortages in recent years. In April, the Government Accountability Office reported
that 270 medications remain in active shortage, only slightly below the record 323 set in 2024.

With shortages continuing in the commercial market, it’s worth asking: Is the federal healthcare network doing all it can to prepare for and withstand similar
disruptions? Meeting that challenge will require government-only pharmaceutical suppliers who can navigate the scale, complexity and compliance demands
of federal pharmaceutical procurement.

The federal healthcare system operates on a massive scale. The Departments of Veterans Affairs and Defense each serve 9 million beneficiaries and
together manage hundreds of millions of prescriptions annually. The VA’s Consolidated Mail Outpatient Pharmacy network dispenses more than
500,000 prescriptions daily to 330,000 veterans.

Meeting this demand requires a complex procurement process. For example, CMOP is more efficient when receiving pre-packaged “unit-of-use”
bottles — i.e. 30‑ and 90‑count formats in specific bottle sizes ready for patient labeling and immediate dispensing. While these requirements help
the department meet demand, they also create barriers for commercial suppliers to comply with these standards.

That’s where government-only pharmaceutical suppliers come in. Unlike commercial suppliers, these firms work exclusively with federal agencies
and are built to meet their unique pharmaceutical needs and compliance obligations. They manage everything from customized packaging and
surge-capacity planning to advanced demand forecasting and regulatory adherence. This specialization allows the VA and DoD to maintain
a consistent and compliant pharmaceutical supply chain.

One of their key advantages is a streamlined distribution model. Instead of each manufacturer managing its own logistics and adapting
operations to federal requirements, government-only suppliers consolidate products from across the industry, oversee warehousing and
ensure procurement compliance. This centralization reduces fragmentation, speeds delivery, and relieves manufacturers of complex logistical burdens
to help agencies meet high-volume, mission-critical pharmaceutical needs.

Strict safety and quality standards govern their operations. Suppliers run FDA-registered facilities with compliant labeling, robust quality
controls and secure cleanrooms. Some packaging suites can produce hundreds of thousands of bottles monthly while others focus on low-volume
or specialized drugs vital to certain clinical settings. This flexibility allows the VA and DoD to source high-volume generics and niche medications
without compromising quality or efficiency.

Equally important are their forecasting capabilities. Government-only suppliers integrate daily operational data with market trends to anticipate
demand, identify potential shortages, and recommend purchasing strategies to prevent supply gaps.

This data-driven approach not only ensures consistent drug availability but also helps federal buyers secure the best value for taxpayer dollars.
Although they account for 7 percent of federal pharmaceutical spending, government-only suppliers deliver more than 30 percent of total prescription
volume, which means more medicine per dollar. This model benefits patients, agencies and manufacturers.

However, government-only suppliers are limited to low-priced generic medications, particularly at the VA. The Veterans Health Care Act of 1992 sets
rules for which drugs are listed on the Federal Supply Schedule. Because the law predates the government-only supplier model, the VA’s current interpretation
limits its full integration into the federal network.

As a result, the VA misses opportunities to expand its competitive vendor base for high-cost branded and biologic drugs and use specialized partners
who could help ensure a steady supply during shortages, improve pricing and strengthen readiness. Adjusting the VA’s interpretation of the VHCA
could remove these barriers and make it easier to contract with government-only suppliers without creating unintended pricing consequences for manufacturers.

The VA and DoD have a responsibility to ensure servicemembers and veterans receive the treatments they need without delay. That means partnering with
experienced suppliers who focus exclusively on the federalnetwork and have the infrastructure, compliance expertise and forecasting capabilities to keep
essential medications flowing. A strong, reliable partnership with these firms is essential to delivering on the promise of care for those who have served.

Read the article here: https://dcjournal.com/government-only-suppliers-keep-va-and-dod-pharmacies-running/