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115th Congress    }                                    {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                    {      115-693




  May 21, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


    Mr. Roe of Tennessee, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 5418]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 5418) to direct the Secretary of Veterans 
Affairs to carry out the Medical Surgical Prime Vendor program 
using multiple prime vendors, having considered the same, 
report favorably thereon without amendment and recommend that 
the bill do pass.


Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Subcommittee Consideration.......................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Earmarks and Tax and Tariff Benefits.............................     4
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     6
Constitutional Authority Statement...............................     6
Applicability to Legislative Branch..............................     6
Statement on Duplication of Federal Programs.....................     6
Disclosure of Directed Rulemaking................................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill as Reported.............     7

                          PURPOSE AND SUMMARY

    H.R. 5418, the ``Veterans Affairs Medical-Surgical 
Purchasing Stabilization Act,'' would direct the Department of 
Veterans Affairs (VA) to correct problems with its medical-
surgical formulary using input from medical professionals with 
relevant expertise rather than administrative staff. This 
legislation would also prevent VA from outsourcing the creation 
of this formulary. Representative Jack Bergman of Michigan 
introduced H.R. 5418 on March 29, 2018.


    The Veterans Health Administration (VHA) has relied on a 
just-in-time supply chain system since the 1990s, after it 
abolished its supply depots. The Medical Surgical Prime Vendor 
program (MSPV), which began in 2005 in a form recognizable to 
its current form, sought to partially standardize the list of 
medical and surgical supplies that clinicians nationwide are 
permitted to purchase, and to partially outsource the ordering, 
storing, inventory management, shipping, tracking, and delivery 
tasks formerly performed by VHA employees, in the supply depots 
and medical centers. Contractors called ``prime vendors'' 
perform this work for various regions of the country, whereas 
the VHA Logistics Service continues to perform the work that 
has not been outsourced, primarily stocking and distributing 
supplies once they arrive in the medical center. The prime 
vendors obtain the medical and surgical supplies from 
suppliers, with whom VHA contracts directly. VHA employees must 
utilize the MSPV system, within certain parameters, to purchase 
any medical and surgical supplies included in the MSPV product 
list. Some purchasing of medical and surgical supplies 
continues to occur outside of MSPV, often through government 
purchase cards.
    In February 2016, VA awarded new prime vendor contracts for 
VHA's use reflecting the revamped Medical Surgical Prime 
Vendor-Next Generation (MSPV-NG) program. Whereas MSPV, only 
modestly limited the list of available medical-surgical 
products, MSPV-NG aggressively standardized the list by 
creating a medical-surgical formulary. MSPV-NG's objective was 
to realize greater savings by buying fewer distinct items in 
greater quantity from fewer suppliers while minimizing the 
volume of government purchase card usage. The MSPV-NG system 
became active in December 2016, but operated simultaneously 
with the older MSPV system until April 2017.
    In its November 2017 report entitled, ``Veterans Affairs 
Contracting: Improvements in Buying Medical and Surgical 
Supplies Could Yield Cost Savings and Efficiency,'' the 
Government Accountability Office found that MSPV-NG had not met 
VHA medical centers' needs and its usage remained far below the 
target. This was because the medical-surgical formulary was 
developed with limited clinical input, and VA was unable to 
award an adequate number of competitive supplier contracts.
    In October 2017, VA released an informational notice to 
contractors describing the draft vision for a MSPV 2.0 program. 
MSPV 2.0 contemplated one prime vendor spanning the United 
States, rather than multiple regional prime vendors, which 
would be responsible for developing the formulary, selecting 
and contracting with suppliers, all distribution, inventory 
management, quality control, and all aspects of filling VHA 
    In April 2018, VA released a justification and approval 
document indicating the Department's intent to modify the 
existing prime vendor contracts without providing full and open 
competition, in order to restructure again the MSPV-NG program. 
The document acknowledged that MSPV-NG has fallen considerably 
short of its intended outcomes, and its formulary has not grown 
to sufficient size and maturity. The planned restructuring 
principally consists of tasking the prime vendors to identify 
and, upon receiving approval from VHA, select and enter into 
agreements with the suppliers, rather than VA contracting with 
the suppliers directly.
    The Committee continues to be concerned with the 
unsatisfactory state of the medical-surgical formulary, 
reflecting inadequate input from clinicians and broken internal 
processes, which has rendered MSPV-NG unable to meet VHA 
facilities' need to receive the correct medical and surgical 
supplies in a just-in-time manner. It is necessary that the 
formulary be developed and administered by clinicians who 
possess expertise in the specific types of items on which they 
work, not logisticians who lack medical expertise or clinicians 
with irrelevant expertise. It is also critical to the program's 
success that VA not pursue the MSPV 2.0 concept empowering one 
national prime vendor, as it would concentrate too much market 
power in one company that, given past experience, may be 
incentivized to exploit such market power to the detriment of 
the suppliers. Additionally, determining the composition of the 
formulary is an inherently governmental responsibility that 
belongs to VHA, and it would be inappropriate to shift this 
function to a prime vendor.


    On March 7, 2018, the Subcommittee on Oversight and 
Investigations held a legislative hearing that included a 
discussion of a draft bill regarding the Medical Surgical Prime 
Vendor (MSPV) program, which would later be introduced as H.R. 
    The following witnesses testified:
          The Honorable Cathy McMorris Rodgers, U.S. House of 
        Representatives, 5th District, Washington; Fred Mingo, 
        Director of Program Control, Program Executive Office, 
        Electronic Health Record Modernization Program, U.S. 
        Department of Veterans Affairs, accompanied by Ricky 
        Lemmon, Acting Deputy Chief Procurement Officer, 
        Veterans Health Administration, U.S. Department of 
        Veterans Affairs, John Adams, Director of Corporate 
        Travel, Office of Management, U.S. Department of 
        Veterans Affairs, and Katrina Tuisamatatele, Health 
        Portfolio Director, Office of Information and 
        Technology, U.S. Department of Veterans Affairs; Louis 
        Celli, Jr., Director, Veterans Affairs & Rehabilitation 
        Division, The American Legion; and Scott Denniston, 
        Executive Director National Veterans Small Business 
    Statements for the record were provided by:
          The Honorable Cathy McMorris Rodgers, U.S. House of 
        Representatives, 5th District, Washington; and Veterans 
        of Foreign Wars.


    There was no Subcommittee markup of H.R. 5418.

                        COMMITTEE CONSIDERATION

    On May 8, 2018, the full Committee met in open markup 
session, a quorum being present, and ordered H.R. 5418 
favorably reported to the House of Representatives by voice 
vote. A motion by Representative Tim Walz of Minnesota to 
report H.R. 5418 favorably to the House of Representatives was 
adopted by voice vote.

                            COMMITTEE VOTES

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, there were no recorded votes 
taken on amendments or in connection with ordering H.R. 5418 
reported to the House. A motion by Representative Tim Walz of 
Minnesota to report H.R. 5418 favorably to the House of 
Representatives was adopted by voice vote.


    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.


    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are to ensure VA corrects known problems 
within its MSPV program and to maximize relevant clinical input 
when developing its formulary.


    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.


    H.R. 5418 does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate on H.R. 
5418 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.


    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
for H.R. 5418 provided by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 14, 2018.
Hon. Phil Roe, M.D.,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5418, the Veterans 
Affairs Medical-Surgical Purchasing Stabilization Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Ann E. 
                                                Keith Hall,

H.R. 5418--Veterans Affairs Medical-Surgical Purchasing Stabilization 

    H.R. 5418 would require the Department of Veterans Affairs 
(VA) to use multiple vendors in procuring medical supplies and 
ensure that the employees responsible for selecting the 
supplies have medical expertise regarding those items. VA 
currently uses four vendors to purchase its medical supplies 
and employs clinicians on its integrated product teams to 
select those supplies. The bill also would require VA to submit 
quarterly reports to the Congress identifying the individual 
employees at VA who determine which items to purchase for VA's 
formulary and describing their medical expertise. CBO believes 
that most of the requirements in the bill would codify VA's 
existing practice. Therefore, CBO estimates that implementing 
the bill would cost less than $500,000 over the 2019-2023 
period to prepare the necessary reports for the Congress. That 
spending would be subject to the availability of appropriated 
    Enacting H.R. 5418 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 5418 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 5418 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Ann E. Futrell. 
The estimate was reviewed by Leo Lex, Deputy Assistant Director 
for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 5418 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.


    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 


    Pursuant to Article I, section 8 of the United States 
Constitution, H.R. 5418 is authorized by Congress' power to 
``provide for the common Defense and general Welfare of the 
United States.''


    The Committee finds that H.R. 5418 does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of section 102(b)(3) of 
the Congressional Accountability Act.


    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that no provision 
of H.R. 5418 establishes or reauthorizes a program of the 
Federal Government known to be duplicative of another Federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.


    Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), 
the Committee estimates that H.R. 5418 contains no directed 
rulemaking that would require the Secretary to prescribe 


Section 1. Short title

    Section 1 of the bill would establish the short title as 
the ``Veterans Affairs Medical-Surgical Purchasing 
Stabilization Act.''

Section 2. Medical Surgical Prime Vendor Program

    Section 2(a) of the bill would require the Secretary of 
Veterans Affairs to operate the MSPV program, or any successor 
program regarding the procurement of certain medical, surgical, 
and dental supplies or laboratory supplies for VA medical 
centers, in a manner that involves multiple regional prime 
vendors instead of a single nationwide prime vendor.
    Section 2(b) of the bill would require the Secretary, in 
developing the formulary for the MSPV or a successor program, 
to ensure that each VA employee who conducts formulary analyses 
or makes decisions with respect to including items on the 
formulary has medical expertise relevant to the items for which 
the employee conducts such analyses or makes such decisions. 
Additionally, this bill would require that, within 30 days of 
enactment and quarterly thereafter, the Secretary shall submit 
a list to the House and Senate Committees on Veterans' Affairs 
that details each employee, their relevant medical expertise, 
and the categories of items in the formulary they analyzed or 
on which they made decisions.


    If enacted, this bill would make no changes to existing