VA Health Care: Pharmacy Inventory Management Could Benefit from System-Wide Oversight

VA provides health care services, including pharmacy services, to approximately 9 million veterans each year. Since 2000, VAMCs have faced recurring challenges in managing their pharmacy inventories, including difficulties with accurately accounting for and updating inventory totals through their pharmacy systems.

GAO was asked to review VA pharmacy inventory management. This report (1) describes approaches selected VAMCs use to manage their pharmacy inventories and (2) assesses the extent to which VA oversees VAMCs' efforts to manage their pharmacy inventories.

To conduct this work, GAO visited a non-generalizable selection of five VAMCs chosen for the complexity of services offered and variation in location. GAO also reviewed VA national policies and local polices for the selected VAMCs and interviewed VA officials at the headquarters, regional, and local levels. GAO assessed VA's oversight of pharmacy management in the context of federal internal control standards.

Selected Department of Veterans Affairs' (VA) medical centers (VAMC) use generally similar approaches for managing their pharmacy inventories. For example, all VAMCs store certain medications in secured areas. However, GAO found that VAMCs have also taken unique approaches for procuring and tracking medications, as allowed under VA policy. For example, to better address medication shortages, one VAMC pharmacy GAO visited established a shortage committee that meets on a weekly basis. Another VAMC pharmacy uses an automated dispensing machine together with compatible software that allows the pharmacy to track the location of most inpatient medications in real-time (see figure).

GAO also found that VA's oversight of VAMCs' pharmacy inventory management is limited as VA lacks a comprehensive inventory management system or a focal point for system-wide oversight. In May 2018, VA signed a contract for a new electronic health records system that should allow VA to monitor VAMCs' inventories; however, VA officials expect implementation of this system to take up to 10 years. Based on a review of VA policies and interviews with VA officials, GAO found that VA has not designated a focal point with defined responsibilities for system-wide oversight of VAMCs' pharmacy inventory management. This is inconsistent with federal internal control standards for monitoring and establishing structure and authority to achieve an entity's objectives. Without a focal point for system-wide oversight, VA has limited awareness of the unique approaches that VAMCs use to manage their inventories and is missing an opportunity to evaluate these approaches. Additionally, VA cannot effectively share and standardize inventory management best practices as appropriate. Having a focal point is especially important given that VAMCs have historically had challenges in managing their inventories and a comprehensive pharmacy inventory management system may not be available for the foreseeable future.

GAO recommends that VA designate a focal point for overseeing VAMCs' pharmacy inventory management efforts system-wide and define the focal point's responsibilities. VA concurred in principle with the recommendation.

The Department of Veterans Affairs (VA) provides health care services,  including pharmacy services, to approximately 9 million veterans each  year. Veterans can receive a range of services at the approximately 170  VA medical centers (VAMC) throughout the nation, including traditional  hospital-based services such as surgery, critical care, and mental health  care. As a significant part of delivering health care to veterans, VAMCs  also provide medications, prescription refills, and other pharmacy  services. These VAMCs are generally responsible for managing their  own pharmacy inventories—that is, for procuring, storing, tracking, and  dispensing medications to veterans.

Managing pharmacy inventories effectively to provide pharmacy services  to veterans can be challenging. In 2000, a VA Office of Inspector General  (OIG) audit found that VAMC pharmacies carried excess inventory due to  a reliance on informal inventory methods and identified the need for  VAMCs to use modern inventory techniques and automated pharmacy  inventory management systems. Subsequent OIG and GAO reports  have identified some of the technological challenges VA faces in  overseeing its VAMC pharmacies. For example, a 2009 VA OIG report  found that VA could not accurately account for the medications at VAMC  pharmacies because VA lacked reliable information to do so. Similarly, in  2017 we reported that VA does not have the systems that would allow it  to keep a perpetual inventory and monitor VAMC pharmacy inventory  levels in real time. These reports have raised broader concerns about  how VA oversees its VAMCs’ pharmacies.

You asked us to review the management and oversight of VAMC  pharmacy inventories. In this report, we describe how selected VAMCs manage their pharmacy inventories; assess the extent to which VA oversees VAMCs’ efforts to manage  their pharmacy inventories.

To describe how selected VAMCs manage their pharmacy inventories,  we identified their approaches for procuring, storing, tracking, dispensing,  and disposing of medications, the main process that all pharmacies  generally use to manage their pharmacy inventories. Our review focused  on pharmacy inventory of all medications—including controlled and non- controlled substances—dispensed within the VAMCs’ inpatient wards or  at their outpatient pharmacies. Our review focused on VAMCs’  management of their inpatient and outpatient pharmacy inventories; as  such we did not review pharmacy inventory management at the  consolidated mail outpatient pharmacies. We conducted site visits at a  non-generalizable sample of five VAMCs that we selected based on  diversity in geographic regions, differences in facility complexity, and  variation in pharmacy operations efficiency determined by comparing  expected and observed pharmacy expenditures by VAMC for fiscal year  2016. Although VA officials identified limitations in the pharmacy  expenditures data, we found that the data were sufficiently reliable to use  as one criterion for selecting VAMCs to visit. The five VAMCs we visited  are located in Cheyenne, Wyoming; Danville, Illinois; Philadelphia,  Pennsylvania; Richmond, Virginia; and San Francisco, California. At each  of these five VAMCs, we toured inpatient and outpatient pharmacy  operations and conducted semi-structured interviews with VAMC officials  and staff responsible for managing pharmacy inventory—including VAMC  Executives, the Chief and Associate Chief of Pharmacy Services,  pharmacy staff, and nursing staff. We also observed the information  technology (IT) systems and automated medication dispensing machines  and software that each VAMC uses to manage pharmacy inventory. In  addition, we reviewed relevant national VA and local VAMC policies and  guidance for managing pharmacy inventory.

To examine the extent to which VA oversees VAMCs’ efforts to manage  their pharmacy inventories, we assessed the extent to which VA Central  Office (VACO) and the Veterans Integrated Service Networks (VISN)  oversee the five selected VAMCs’ management of pharmacy inventory.  The VISNs report to VACO and are responsible for managing and  overseeing VAMCs within their geographic area. To conduct our work, we  reviewed VA policies, procedures, and guidance pertaining to the  management and oversight of pharmacy inventory to determine the  extent of VACO’s and the VISNs’ oversight responsibilities. This included  a review of meeting minutes from regularly scheduled calls between  VACO and VISN officials. We also interviewed VACO officials from the  Pharmacy Benefits Management Service (PBM), the National Acquisition  Center (NAC), and the Office of Information and Technology (OIT) to  determine their roles in overseeing VAMC pharmacy inventory. In  addition, we interviewed the five VISN Pharmacy Executives (VPE)  responsible for assisting the selected VAMCs with pharmacy-related  tasks. We examined VA’s oversight in the context of federal standards for  internal controls related to establishing structure and authority to achieve  the entity’s objectives and internal controls related to monitoring. To  better understand other integrated health systems’ best practices for  managing pharmacy inventory, we also interviewed representatives from  the American Society of Health-System Pharmacists, the Mayo Clinic,  and the Cleveland Clinic. We also reviewed our previous work and the VA  OIG’s work that is related to VAMC’s pharmacy inventory management.

We conducted this performance audit from September 2017 to  September 2018 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.

General Process for Managing Pharmacy Inventories in Hospital Settings

In general, the process for managing inventories of medications at  VAMCs and non-VA pharmacies in hospital settings is similar. The steps  of the process are (1) procuring medications from vendors or other  suppliers, (2) receiving and storing medications, (3) tracking medications  to account for all items and prevent diversion, (4) dispensing medications  to patients, and (5) disposing of expired or wasted medications. Hospital  settings include both inpatient and outpatient pharmacies.

Procurement. Pharmacies use a procurement process to order  medications for pharmacy inventory, which includes activities such as  medication selection, cost analysis, purchasing procedures, and record  keeping. As part of medication selection, pharmacies may use a  formulary, which is a list of medications that have been approved for  prescription within a hospital or health care system.

A prime vendor or wholesaler is one of the most commonly used sources  to obtain medications for the pharmacy. Prime vendors order large  quantities of medications from manufacturers, allowing pharmacies to  purchase various products from many drug manufacturers at once.  Orders for products that are not carried by the prime vendor may need to  be ordered through another source, such as directly from the  manufacturer.

Receipt and storage. When medications are delivered to the pharmacy,  staff are to take several steps to properly receive and store the shipment.  For example, to ensure there is segregation of duties, the person  responsible for ordering and purchasing the medications is supposed to  be different than the person receiving and stocking pharmacy inventory.  Additionally, any delivered products that require special storage  conditions, such as freezing or refrigeration, are to be checked in first to  maintain the stability of the medication.

Tracking. Once in storage, pharmacies use a variety of tools to account  for the filling, dispensing, and removal of medications in both inpatient  and outpatient settings. Some pharmacies have software that allows them  to track inventory in real time, an ability known as maintaining perpetual  inventory. A perpetual inventory system is a method of recording the  quantity of a particular medication continuously as prescriptions are filled  and dispensed. After each prescription is filled and dispensed to the  patient, the amount of medication used for the prescription is removed  from the inventory to ensure the quantity on hand recorded by the  software is always current.

Many medications have barcodes on their packaging to allow for easy  identification of the medication in a computer system. The barcode  generally includes the product’s National Drug Code, which indicates the  name and package size of the medication. In the hospital setting,  medications can be scanned out of the pharmacy and into machines for  storage on hospital wards.

Dispensing. In both inpatient wards and outpatient pharmacies,  automated dispensing machines and barcode technology can assist staff  in maintaining and dispensing medications to patients. Automated  dispensing machines generally include several drawers and cabinets that  have pockets or trays that hold preset levels of a variety of common  medications. They may also be used to hold controlled substances,  generally in locked boxes or cubes within the machine. On hospital wards  medication in automated dispensing machines is often packaged in unit  doses—individually packaged medications for patient use. Barcodes can  help verify a prescription before nurses give medication to a patient.  Hospitals that do not have automatic dispensing machines use carts with  drawers filled with each patient’s medication. Outpatient pharmacies use  automated dispensing machines to assist with filling prescriptions.  Depending on the type of automated dispensing machine, the capabilities  can include label printing, pill counting, pouring pills into prescription  bottles, and applying the label to the prescription bottle.

Return or disposal. Medication waste and expired medications are to be  pulled from pharmacy inventory and either returned to a reverse  distributor or manufacturer for credit or, if not eligible for return, disposed  of by the pharmacy or sent to an outside company for destruction.  Reverse distributors charge a fee, which is generally a percentage of the  refund that is automatically deducted from the final refund amount.

Figure 1 provides an overview of the steps of the pharmacy inventory  management process.

VA Organizational Structure and Pharmacy Policies

VA’s health care system is organized into entities at the headquarters,  regional, and local levels. At the headquarters level, PBM is responsible  for supporting VISNs and VAMCs with a broad range of pharmacy  services, such as promoting appropriate drug therapy, ensuring  medication safety, providing clinical guidance to pharmacists and other  clinicians, and maintaining VA’s formulary of medications and supplies  VAMCs use to deliver pharmacy benefits. VA’s OIT is responsible for  providing technology services across the department, including the  development and management of all IT assets and resources. As such,  the office supports VA’s health care system in planning for and acquiring  IT capabilities within VA’s health care system network of hospitals,  outpatient facilities, and pharmacies. VA’s NAC is responsible for  administering various health care-related acquisition and logistics  programs across VA.

At the regional level, VAMCs are located in one of 18 VISNs. Each VISN  is responsible for overseeing VAMC pharmacies within a defined  geographic region. At the local level, there are approximately 170  VAMCs. Each VAMC is responsible for implementing VA’s pharmacy  policies and programming.

VA policy establishes parameters for VAMCs to follow when managing  their pharmacy inventories. These policies address various aspects of  pharmacy services, including inpatient and outpatient pharmacy services,  general pharmacy requirements, supply chain management, controlled  substances management, and the formulary management process. For  example, the Supply Chain Inventory Management directive states that all  VAMC pharmacies should use the prime vendor inventory management  software to calculate the amount of each inventory item they need to  reorder. However, the directive also states that there are additional  pharmacy inventory tools available to VAMC pharmacies and that each  pharmacy has the option to use its own automated inventory  management systems to generate orders for its prime vendor. VA policy  does not specify minimum quantities to order; instead, VAMC  procurement staff is authorized to use their expertise to determine the  appropriate quantity to order.

Selected VAMCs Have Generally Similar Approaches for Managing Their Pharmacy Inventories, with Some Unique Approaches

In general, all five of the selected VAMCs we reviewed take similar  approaches for the various steps included in the pharmacy inventory  management process—that is, procuring medications from vendors or  other suppliers, receiving and storing these medications, tracking  medications at the pharmacy to account for all items and prevent  diversion, dispensing medications to patients, and disposing of expired  medications. (See fig. 2).

We found that while the five selected VAMCs have similar approaches for  receiving and storing, dispensing, and disposing of medications, some  VAMCs have also taken unique approaches in implementing two steps of  the pharmacy inventory management process: procurement and tracking.  VA policy outlines parameters for VAMCs to manage their pharmacy  inventories, and VA officials told us that VAMC pharmacy staff can use  discretion to implement their own approaches for managing their  pharmacy inventories.

All five of the selected VAMC pharmacies we reviewed use several  sources of information to inform future orders—including past purchase  order history reports from VA’s prime vendor, manual inventory counts by  pharmacy staff, and automated dispensing machine inventory  information. VA officials told us that all VAMCs also track procurement  spending and its impact on the VAMCs’ budget and spending. However,  pharmacy officials at one of the selected VAMCs we visited told us they  use VA’s health information system—Veterans Health Information  Systems and Technology Architecture (VistA)—and additional prime  vendor reports to identify specific information regarding 1) expiring  medications that may need to be re-purchased, 2) medications that  account for the top 80 percent of pharmacy costs, and 3) all medications  that are purchased daily. VAMC officials told us these reports help them  to better manage pharmacy inventory and track pharmacy spending.

To better anticipate and address potential medication shortages, officials  at another selected VAMC pharmacy told us they established a shortage  committee that meets on a weekly basis. Established in September 2017,  the committee includes the Director of Pharmacy and other pharmacy  staff. Our review of meeting notes shows that the committee discusses  which medications could experience or are experiencing shortages and  how the VAMC could adjust to these shortages by, for example,  developing clinical and logistical solutions to help maintain optimal patient  care. According to the officials at the selected VAMC pharmacy, the  committee has been an effective resource to help manage pharmacy  inventory problems should they occur.

Several VAMC officials also told us that the procurement technicians, who  are responsible for ordering pharmacy inventory, are very important  because they possess valuable institutional knowledge based on many  years of experience and training. However, VAMC officials told us the  salaries and potential career advancement opportunities for procurement  technicians can be limited, and the officials expressed concern that these  technicians could find better opportunities within the VAMC or with  external employers. To help retain procurement technicians, two of the  selected VAMC pharmacies we visited have created higher paying  procurement technician positions (General Schedule level 8   positions, instead of GS-6 or GS-7).

To better identify potential instances of diversion, two of the selected  VAMC pharmacies use enhanced analytics software on the automated  dispensing machines in their inpatient wards to track how frequently  controlled substances and other frequently utilized medications are  prescribed. For example, one of the pharmacies uses data from these  reports to identify how often individual staff members are accessing  automated dispensing machines. Additionally, officials at a third VAMC  recently deployed automated dispensing machines that are equipped with  an enhanced analytics program that can identify trends associated with  diversion. The remaining two VAMCs we visited do not have enhanced  analytic software that could help them to identify instances of potential  diversion.

Across all 5 selected VAMCs, we observed several different IT systems  used to help manage non-controlled inpatient inventory. One of the  selected VAMC pharmacies uses a modular automated dispensing  machine together with inventory management software that maintains a  perpetual inventory for most non-controlled substances stored in its  inpatient pharmacy. (See fig. 3). According to officials, this software has  allowed the pharmacy to reduce waste and improve staff workflow, as  staff do not have to spend time tracking down inventory. None of the  other VAMC pharmacies we visited have the capability to track non- controlled substances in real time.

Additionally, to more efficiently identify medication lot numbers during  recalls, one VAMC pharmacy we visited was in the process of  implementing a technology that allows pharmacy staff to scan a case of  medication with the same national drug code, lot number, and expiration  date and then print and attach a radio frequency identification tag to each  medication bottle. The tag allows for quick electronic identification of the  medication for disposal. Other selected VAMC pharmacies manually  identify recalled medications from inventory based on the name of the  medication and lot number.

Oversight of Pharmacy Inventory Management Is Limited, as VA Lacks a Comprehensive Inventory Management System or a Focal Point for System-Wide Oversight

VA does not yet have a VA-wide pharmacy inventory management  system in place that would allow it to monitor VAMC pharmacy inventory  in real time and provide better oversight of how VAMC pharmacies  manage their inventories. We found that VACO and the five VISNs we  reviewed provide some oversight related to VAMC pharmacy inventory  management. However, that oversight is limited, as no entity has been  assigned responsibility for overseeing system-wide performance of VAMC  pharmacies in managing their inventories.

VA’s Oversight of VAMCs’ Pharmacy Inventory Management Is Limited, in Part Because VA Has Not Yet Implemented a Comprehensive Inventory Management System

VA’s oversight of VAMC pharmacy inventory management is limited in  part because VA currently lacks a comprehensive system that would  allow the department and its VAMCs to monitor pharmacy inventory in  real time. According to PBM officials, the lack of a VA-wide system makes  it difficult to oversee VAMC pharmacy inventory management, and PBM  has recognized the lack of such a system as a material weakness for  several years. PBM officials said that implementation of a VA-wide  pharmacy inventory management system would allow them to monitor  each VAMC’s pharmacy inventory in real time, which would, in turn, allow  them to better manage inventory and help alleviate shortages at the  national level by facilitating transfers of inventory between VAMCs as  needed. Additionally, officials said that such a system would lead to better  planning and projections for purchasing decisions, allow PBM to track  medication expiration dates and lot numbers more effectively, and  improve VAMC staff response to medication recalls.

Although VA has acknowledged the need for a VA-wide pharmacy  inventory management system, such a system may not be available for  the foreseeable future. PBM officials told us they have requested this  system since the early 2000s. However, despite the documented  technological challenges VA faces in overseeing its VAMC pharmacies,  changing IT priorities, funding challenges, and the narrowing of the scope  of a Pharmacy Re-engineering Project have prevented the system’s  development. In 2017, we reported that VA’s pharmacy systems could  not maintain a real-time inventory across the VAMCs, and we  recommended that VA assess the priority for establishing an inventory  management system capable of monitoring medication inventory levels  and indicating when medications needed to be reordered. VA concurred  with our recommendation. In June 2017, VA announced its intention to  replace VistA— VA’s health information system—with an off-the-shelf  electronic health record system. VA officials told us that the new system  will have the capability to monitor pharmacy inventory in real time across  VA. VA signed the contract for this new system in May 2018; however, full  implementation is expected to take up to 10 years. In the interim, VA  officials told us that while they will maintain current pharmacy systems,  they do not plan to build any new systems—including a VA-wide  pharmacy inventory management system—so they can efficiently  manage resources in preparation for the transition to the new system.

VACO and VISNs Provide Some Limited Oversight, but VA Lacks a Focal Point for System-Wide Oversight of Pharmacy Inventory Management

VACO and the five VISNs we spoke with provide some limited oversight  related to VAMC pharmacy inventory management, but no entity has  system-wide responsibility for overseeing the performance of VAMC  pharmacies in managing their inventories. Instead, responsibility for  overseeing pharmacy inventory management is largely delegated to each  VAMC’s leadership. (See fig. 4 for a description of VACO headquarters,  VISN, and VAMCs’ roles and responsibilities in managing pharmacy  inventory.)

In absence of a VA-wide inventory management system, PBM officials  told us that they have employed manual workaround mechanisms to  oversee pharmacy management processes. Specifically, PBM requires  VAMC pharmacies to conduct an annual inventory of all medications and  a quarterly inventory of 5 selected high-value non-controlled medications  at risk of diversion. PBM officials told us they remind VAMCs of the  requirement to conduct these inventories, collect and aggregate the data  from these inventories, and make summary reports from these data  available as a resource to the VPEs and VAMC Chiefs of Pharmacy. PBM  officials acknowledged that these manual workarounds are inefficient,  increase labor costs, and leave the agency with an inability to see on- hand inventory across the system in real time. Additionally, the manual  workarounds may be implemented differently at each VAMC, resulting in  varying degrees of data reliability and limited opportunities for high-level  oversight and data consolidation. PBM officials said that they do not  independently analyze these data to identify trends, and they  acknowledged that both the quarterly and annual inventories have limited  usefulness for overseeing inventory management system-wide.  Additionally, officials at some of the selected VAMCs told us they found  the quarterly and annual inventories to have limited usefulness for  managing their pharmacy inventories.

PBM officials told us they also hold regular meetings with VPEs and  VAMCs, which provide the opportunity for discussion of pharmacy  inventory management issues. However, our review of the minutes of the  meetings between PBM and VPEs found that, over the past 3 years,  pharmacy inventory management was rarely a topic of discussion. PBM  officials noted that there is always an opportunity for open discussion at  these meetings for VPEs to raise any issues, including issues related to  pharmacy inventory management, but these discussions may or may not  be captured in the meeting minutes. PBM officials said they also  regularly discuss various topics with the VAMC Chiefs of Pharmacy and  other staff, but none of these calls are directly related to pharmacy  inventory management.

Officials from VACO’s NAC and OIT told us that they provide some  assistance related to pharmacy inventory management but do not take  part in the day-to-day management at the VAMC level and also do not  have any oversight responsibilities. For example, a NAC official said the  office coordinates with PBM on medication shortage issues and  establishes national contracts for medications. NAC also sends out a  weekly shortages report to various pharmacy groups as a tool to help  them with known or expected shortages. Additionally, NAC’s  Pharmaceutical Prime Vendor team is responsible for administering the  contract with the prime vendor through daily monitoring of issues and  quarterly reviews with the prime vendor and PBM. OIT develops  pharmacy-related applications for VistA based on requirements from  PBM, and officials said that the majority of OIT’s support to VAMCs  consists of assisting them with issues related to VistA.

At the VISN level, VPEs we interviewed also said they conduct some  pharmacy inventory management oversight activities for the VAMCs  within their network. While in general VA policy does not outline any  specific roles for VPEs related to oversight of pharmacy inventory  management, all five VPEs told us that they review the results of their  VAMCs’ annual inventories and discuss any issues that arise from this  exercise with VAMCs as needed. VPEs told us that they also review the  results of the quarterly inventory of five selected high-value, non- controlled substances and may follow-up with the VAMCs if their actual  inventory of the medications is inconsistent with expected levels.  Additionally, some VPEs reported that they have undertaken additional  oversight activities apart from reviewing results of the mandatory  inventories. For example, one VPE told us he has developed a dashboard  with 53 measures that, while focused on formulary management, also  have inventory management implications. Additionally, this VPE said that  a VISN-wide procurement work group meets on a monthly basis and  serves as a venue for procurement technicians to share inventory  management best practices. Such additional activities may be helpful, but  since VPEs only have responsibility for VAMC pharmacies within their  network, they may not be aware of pharmacy inventory management  approaches being used at other VAMCs across VA.

Although VA offices at the headquarters and regional levels provide some  assistance and oversight of how VAMCs manage pharmacy inventory at  the local level, VA has not designated a focal point with defined  responsibilities for system-wide oversight; instead they rely on local  leadership to oversee pharmacy inventory management at the VAMCs.  As a result, VA cannot assess the overall performance of VAMCs’  management of their pharmacy inventories. The lack of a focal point with  defined oversight responsibilities is inconsistent with federal internal  control standards for establishing structure and authority to achieve the  entity’s objectives and internal controls related to monitoring.  Specifically, internal controls state that management should establish an  organizational structure, assign responsibility, and delegate authority to  achieve the entity’s objectives. Also, internal controls state that  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. VA’s actions are also  inconsistent with the Office of Management and Budget’s guidance for  enterprise risk management and internal control in managing an  agency. Enterprise risk management is intended to yield an “enterprise- wide,” strategically aligned portfolio view of organizational challenges that  provides better insight about how to most effectively prioritize resource  allocations to ensure successful mission delivery. Without a focal point for  system-wide oversight of VAMC pharmacy inventory management, VA  has limited awareness of the unique approaches that VAMCs use to  manage their inventories and is missing an opportunity to evaluate these  approaches. Additionally, VA cannot effectively share and standardize pharmacy inventory management best practices as appropriate. Having a  focal point for system-wide oversight could allow VA to identify potential  best practices that could be disseminated more widely across its facilities.

Due to the decentralized nature of VA’s organization, VA policy gives  VAMC pharmacies latitude in managing their pharmacy inventories.  Several of the VAMCs we visited have taken unique approaches to  procuring or tracking their inventory. However, because VA does not have  a focal point to systematically oversee VAMCs’ pharmacy management  efforts, VA is missing opportunities to evaluate the effectiveness of these  efforts, as well as share best practices and standardize them across VA  as appropriate. PBM officials told us that the lack of a VA-wide pharmacy  inventory management system limits their ability to oversee VAMC  pharmacy inventory management. However, our review shows that even  without this system there are existing mechanisms that a focal point could  leverage to more systematically oversee how VAMC pharmacies manage  their inventories. For example, a focal point could ensure that PBM  officials, the VPEs, and VAMC pharmacy staff devote time to discussing  pharmacy inventory management approaches and related issues during  regularly scheduled telephone meetings. Leveraging these existing  mechanisms is especially important given that VAMCs have historically  had challenges in managing their inventories, and also because a VA- wide pharmacy inventory management system may not be available for  the foreseeable future.

We are making the following recommendation to the Department of  Veterans Affairs:  The Secretary of the VA should direct the Undersecretary for Health to  designate a focal point for overseeing VAMCs’ pharmacy inventory  management system-wide and define the focal point’s responsibilities.  (Recommendation 1)

We provided a draft of this report to VA for review and comment. In its  written comments, reproduced in appendix I, VA stated that it concurred  in principle with our recommendation. VA also provided technical  comments, which we incorporated as appropriate.

In response to our recommendation, VA stated it plans to establish by  December 31, 2018, a committee of internal stakeholders and subject  matter experts to provide options for overseeing VAMCs’ pharmacy  inventory management. However, it was unclear from VA’s response  whether the planned committee will recommend or designate an entity or  focal point with system-wide oversight responsibilities. VA noted in its  general comments that it does have entities or individuals—referred to as  focal points by VA—responsible for specific functions. However, these  entities do not provide system-wide oversight that could allow the  department to better understand VAMCs’ approaches to pharmacy  inventory management. As we noted in our report, without a focal point  for system-wide oversight, VA has limited awareness of the unique  approaches that VAMCs use to manage their inventories and is missing  an opportunity to evaluate these approaches and standardize them  across VA as appropriate.

Additionally, in its general comments, VA raised concerns regarding our  characterization in the draft report of medication shortages and the use of  automated dispensing units in the context of controlled substances. In  response, we updated the report to include more information about one  VAMC’s use of a committee to address medication shortages. We also  clarified that three VAMCs are using (or will soon have the capability to  use) enhanced analytic software to better leverage data generated  through their automated dispensing machines, which allows them to more  easily identify potential diversion. Finally, VA noted that we did not  discuss PBM’s multiple requests for an enterprise-management system  since the early 2000s; however, this information was included as part of  the draft report sent to VA for review and remains in our final report on  page 14 as part of our finding on the lack of a VA-wide pharmacy  inventory management system.

We are sending copies of this report to the Secretary of the Department  of Veterans Affairs and appropriate congressional committees. The report  is also available at no charge on GAO’s website at http://www.gao.gov.

If you or your staff has any questions regarding this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@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 who made key contributions to  this report are listed in appendix II.

Appendix I: Comments from the Department of Veterans Affairs

Appendix II: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Rashmi Agarwal, Assistant  Director; Nick Bartine, Analyst-in-Charge; Muriel Brown; Kaitlin  Farquharson; Krister Friday; Sandra George; Courtney Liesener; Diona  Martyn; and Michelle Paluga made key contributions to this report.

The VA, which provides health care for 9 million veterans, has faced challenges in managing inventory at its pharmacies. For example, VA medical centers have struggled to accurately account for and update information on medications in stock.

In this report, we found that VA cannot fully oversee management of pharmacy inventories system-wide because VA lacks

a comprehensive system to manage pharmacy inventory—a new system will not be implemented for up to10 years

We recommended that VA designate a focal point to oversee system-wide pharmacy inventory management.