DEPARTMENT OF VETERANS AFFAIRS
Office of Acquisition and Materiel Management
National Acquisition Center
P.O. Box T6 Hines IL 60141

COPY FOR YOUR INFORMATION

January 9, 2001

In Reply Ruler To: 90N

Dear Federal Supply Schedule (F S S) 65 IB Contractor:

I am writing to alert you to the possible diversion of products sold under your Federal Supply Schedule (F S S) contract. Based upon information and inquiries from some contractors and from the Indian Health Service (I H S) Regional Supply Service Center (R S S C), Ada, Oklahoma, we have reason to believe that large orders for drugs are being placed by tribal health care clinics, sometimes using a non-government pharmaceutical Prime Vendor (P P V) as an ordering intermediary, for resale or distribution to persons and entitles not entitled to F S S pricing.

As you may know, a Tribal clinic authorized by P. L. 93-638 to order from Federal Supply Schedules is not permitted to resell FSS products without first obtaining the extraordinary approval of the General Services Administration (G S A) and, in the case of drugs, V A (because V A manages the pharmaceutical schedule for G S A.) (See G S A Order 4800.2E, para. 7.d. (5), copy enclosed.) Also, if your company elected to deliver and be paid through a Government P P V, your F S S contract does not require you to honor F S S orders placed through a private, non?government P P V. At your discretion, private agreements may be entered into to facilitate such ordering by eligible entities.

We suggest that you examine incoming direct orders and chargeback requests for unusually large quantities being requested by or delivered to an other Government agency activity, such as a tribal clinic. If you notice such unusual orders, we suggest that you ask the ordering activity to justify the quantity ordered in terms of its own Federal mission and patient base. Also, we recommend you scrutinize for possible diversion all tribal clinic orders placed through a non-Government P P V. Ordering activities may be asked for documentation to prove their contractual relationship with IHS. Recent experience has demonstrated even I H S-authorized clinics ordering drugs through an I H S R S S C may suddenly increase their ordering quantities to divert drugs to a profit-making tribal enterprise. Contractors noticing such large volume increases would be wise to inquire of I H S and the ordering activity what type of use is intended for the drugs. It is V A's position that no F S S contractor is required to fill an order (or that portion of an order) that investigational facts suggest will be diverted into the commercial market.

Please call me at (708) 786-5157 with any questions about your company's obligation to fill FSS orders or if you believe that FSS products already delivered by your company have been diverted.

Sincerely,

George T. Patterson
Executive Director

Enclosure

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