VA Health Care: Opportunities to Significantly Reduce Outpatient Pharmacy
Costs (Letter Report, 10/11/96, GAO/HEHS-97-15).

GAO reviewed the Department of Veterans Affairs' (VA) provision of
over-the-counter (OTC) medications, medical supplies, and dietary
supplements to veterans, focusing on: (1) what OTC products VA
pharmacies dispense; (2) how VA provision of OTC products compares with
that of non-VA health care providers; (3) how much VA spends on OTC
products and how much VA recovers through veterans' copayments; and (4)
opportunities to reduce federal expenditures for OTC products.

GAO found that: (1) in fiscal year (FY) 1995, VA OTC prescriptions
accounted for one-fourth of all prescriptions filled; (2) medications
constituted about 73 percent of the prescribed OTC products dispensed,
medical supplies 26 percent, and dietary supplements less than 1
percent; (3) each VA pharmacy generally handles less than 480 OTC
products, but pharmacy volumes range from 7 percent to 47 percent of all
prescriptions; (4) veterans' access to VA-provided OTC products varies
because some VA pharmacies have restricted which veterans may receive
OTC products or the quantities of such products; (5) other public and
private health care plans cover few OTC products except for insulin and
its related supplies, but when OTC products are covered, availability is
uniform for all beneficiaries; (6) OTC products cost VA an estimated
$164 million in FY 1995 and VA recovered an estimated $7 million through
veterans' copayments; (7) veterans' costs for OTC products vary, and
while some veterans pay the full cost for their OTC products, most
veterans are exempt from copayment requirements; and (8) VA could reduce
the resources devoted to dispensing OTC products or enhance copayment
revenues by more narrowly defining when to provide OTC products,
dispensing OTC products and collecting copayments more efficiently,
reducing the number of OTC products available to veterans on an
outpatient basis, and expanding OTC copayment requirements.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-97-15
     TITLE:  VA Health Care: Opportunities to Significantly Reduce 
             Outpatient Pharmacy Costs
      DATE:  10/11/96
   SUBJECT:  Veterans benefits
             Drugs
             Health care cost control
             Health care programs
             Health insurance
             Budget receipts
             Medical supplies
             Commercial products
             Health care costs
IDENTIFIER:  Medicare Program
             Medicaid Program
             Federal Employees Health Benefits Program
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Hospitals and Health Care,
Committee on Veterans' Affairs, House of Representatives

October 1996

VA HEALTH CARE - OPPORTUNITIES TO
SIGNIFICANTLY REDUCE OUTPATIENT
PHARMACY COSTS

GAO/HEHS-97-15

VA's OTC Pharmacy Costs

(406129)


Abbreviations
=============================================================== ABBREV

  OTC - over-the-counter
  VA - Department of Veterans Affairs

Letter
=============================================================== LETTER


B-272850

October 11, 1996

The Honorable Tim Hutchinson
Chairman, Subcommittee on
 Hospitals and Health Care
Committee on Veterans' Affairs
House of Representatives

Dear Mr.  Chairman: 

In recent years, officials of the Department of Veterans Affairs (VA)
have testified that resources are not sufficient to serve all
veterans seeking care and that they expect such shortages to worsen
in future years.  For fiscal year 1996, VA sought an appropriation of
about $17 billion to provide expected inpatient hospital care to
930,000 patients, nursing home care to 35,000 patients, and
domiciliary care to 18,700 patients.  In addition, VA outpatient
clinics were expected to handle 25.3 million visits. 

Others have expressed concerns about the operating costs of VA
pharmacies.  Specifically, some have questioned whether VA
pharmacies' provision of over-the-counter (OTC) products represents
the most prudent and economical use of VA's available resources.  In
fiscal year 1995, VA's pharmacies filled prescriptions more than 65
million times, at a cost of almost $1 billion.  VA physicians wrote
over 34 million prescriptions for veterans for pharmaceuticals,
including OTC products,\1 to be used on an outpatient basis and
usually provided at low or no cost to the veterans.  VA allows its
physicians to prescribe OTC products primarily because VA physicians
and others are concerned that veterans who need such products may
lack the resources to purchase them and, as a result, not use them. 

We evaluated VA's provision of medications, medical supplies, and
dietary supplements that are available to the general public as OTC
products in private sector outlets nationwide.  More specifically, we
addressed (1) what OTC products VA pharmacies dispense; (2) how VA's
provision of OTC products compares with that of non-VA health care
providers; (3) how much VA spends on OTC products and how much VA
recovers through veterans' copayments; and (4) what opportunities
exist to reduce federal expenditures.\2

To develop this information, we reviewed nationwide OTC product
utilization data VA maintained for 165 pharmacies\3

and obtained information from several headquarters offices, including
the Pharmacy Service and the Medical Care Cost Recovery Office.  We
also obtained information on VA facilities' provision of outpatient
OTC products to veterans from 150 VA pharmacies and officials in VA's
22 networks.\4 (See app.  I for the questionnaire we sent to all VA
pharmacies and their responses.)

To compare VA's provision of OTC products with that of other health
providers and insurers, we contacted the Department of Defense, the
Health Care Financing Administration, the Federal Employees Health
Benefits Program, and the Group Health Cooperative of Puget Sound. 
At VA's pharmacy in Baltimore, we observed dispensing and copayment
collection practices; reviewed a wide range of records and documents;
and discussed VA's provision of OTC products with 20 physicians,
pharmacists, and administrators. 

Our work was performed between October 1995 and July 1996 in
accordance with generally accepted government auditing standards. 


--------------------
\1 As a way to control veterans' access to OTC products in VA
pharmacies, VA requires prescriptions for them.  VA physicians may
write prescriptions that are nonrefillable or that extend for as long
as 12 months with several refills. 

\2 On June 11, 1996, we provided information on our work at a hearing
held by your Subcommittee (see GAO/T-HEHS-96-162). 

\3 VA's pharmacies frequently distribute OTC products through two or
more locations. 

\4 VA has 22 service networks, each consisting of between 5 and 12
facilities. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Our work has shown that all VA pharmacies provide medications and
medical supplies to veterans that are available over the counter
through other local outlets.  The most frequently dispensed OTC
products include (1) medications, such as aspirin, acetaminophen, and
insulin; (2) dietary supplements, including Sustacal and Ensure; and
(3) medical supplies, such as alcohol prep pads, lancets, and glucose
test strips. 

Each VA pharmacy offers a different assortment of products. 
Individual pharmacies generally handled fewer than 480 OTC products,
but the number of OTC products ranged from 160 to 940.  Some
pharmacies restrict which veterans may receive OTC products or in
what quantity they may receive them.  As a result, veterans' access
to OTC products through VA pharmacies varies considerably across the
country. 

Unlike VA, other public and private health care plans cover few, if
any, OTC products for their beneficiaries.  When covered, OTC
products are generally made available on a uniform basis to all
beneficiaries.  These plans' coverage of OTC products is more
restrictive than all but a few of VA's facilities. 

VA pharmacies dispensed OTC products more than 15 million times in
fiscal year 1995 at an estimated cost of $165 million, including
handling costs of $48 million.  VA recovered an estimated $7 million
through veterans' copayments, or about 4 percent of its total OTC
costs.  Individually, veterans' costs varied, depending on the type
of product and the veterans' eligibility status.  Although many
veterans shared a modest portion of the costs and some paid the full
cost, most veterans paid nothing. 

Our work suggests several ways that VA could reduce the resources
devoted to dispensing OTC products or enhance the revenues from
copayments.  First, VA could more narrowly define when to provide OTC
products.  Second, VA could more efficiently dispense OTC products
and collect copayments.  Third, VA facilities could further reduce
the number of OTC products available to veterans on an outpatient
basis.  Finally, the Congress could expand copayment requirements. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Under current law, marketed medical products are classified into two
groups:  one group has about 65,000 products that are safe for
consumers to use only as prescribed by a physician; the other group
has over 300,000 products that, according to U.S.  Food and Drug
Administration standards, are safe for use on the basis of a
manufacturer's labeling instructions alone.  Prescription products
are available only in licensed pharmacies; whereas, other products
are available over the counter at a wide variety of outlets.  OTC
products are generally for conditions for which users can recognize
their own symptoms and levels of relief. 


   VA PHARMACIES PROVIDE AN
   ASSORTMENT OF OTC PRODUCTS
------------------------------------------------------------ Letter :3

VA physicians prescribed OTC products for veterans more than 7
million times in fiscal year 1995, accounting for about one-fifth of
all VA prescriptions.  VA pharmacies filled these OTC prescriptions
over 15 million times, about one-fourth of all prescriptions filled. 

VA physicians prescribed more than 2,000 different OTC products.  VA
pharmacies classify these products into three groups:  medications
(such as antacids), medical supplies (such as insulin syringes), and
dietary supplements (such as Ensure).  Medications account for about
73 percent of the 15 million OTC prescriptions filled; medical
supplies for 26 percent; and dietary supplements for less than 1
percent. 


      VA FACILITIES LIMIT
      PHYSICIANS' PRESCRIPTION OF
      OTC PRODUCTS
---------------------------------------------------------- Letter :3.1

VA's network and facility directors have considerable freedom in
developing operating policies, procedures, and practices for VA
physicians and pharmacies.  Some facility directors have taken
different actions to limit the number of OTC products available
through the pharmacies and the quantity of products veterans can
receive.  Little uniformity in the application of limits is evident,
however. 

In general, each facility has a pharmacy and therapeutics committee
that decides which OTC products to provide based on product safety,
efficacy, and cost-effectiveness.  These products are listed on a
formulary and VA physicians are generally to prescribe only these
products. 

Of the 2,000 different OTC products dispensed systemwide, individual
pharmacies generally handled fewer than 480, with the number of OTC
products ranging from 160 to 940.  (See app.  II for a list of VA
facilities and the number of OTC products dispensed.) Medical
supplies account for the majority of products, with pharmacies
generally dispensing fewer than 10 types of dietary supplements. 
Moreover, three facilities' formularies excluded dietary supplements. 

The volume of OTC products dispensed also varied among facilities. 
Overall, OTC products accounted for about 25 percent of all
prescriptions filled systemwide.  But OTC products represented
between 7 and 47 percent of all prescriptions dispensed at individual
facilities.  (See app.  III for a list of facilities with the
percentage of pharmacy workload represented by OTC products.)

Of note, 100 products accounted for about 70 percent of the 15
million times that OTC products were dispensed.  VA pharmacies
dispensed analgesics such as aspirin and acetaminophen almost 3
million times in fiscal year 1995.  The most frequently dispensed OTC
products included (1) the medications aspirin, acetaminophen, and
insulin; (2) the dietary supplements Sustacal and Ensure; and (3) the
supplies alcohol prep pads, lancets, and glucose test strips.  (See
app.  IV for a list of commonly dispensed OTC products.)


      SOME FACILITIES RESTRICT OTC
      PRODUCTS TO CERTAIN VETERANS
---------------------------------------------------------- Letter :3.2

Facilities have sometimes restricted physicians' prescriptions of OTC
products to veterans with certain conditions or within certain
eligibility categories.  For example, 115 facilities restricted
dietary supplements to veterans who required tube feeding or received
approval for the supplements from dieticians.  For medical supplies,
one facility provided certain supplies only to patients who received
them when hospitalized, and another provided diapers only to veterans
with service-connected conditions.  One facility provided OTC
medications only to veterans with service-connected disabilities. 


      SOME FACILITIES RESTRICT
      QUANTITIES OF OTC PRODUCTS
---------------------------------------------------------- Letter :3.3

Facilities have sometimes restricted the quantities of OTC products
that pharmacies may dispense.  Twenty-eight facilities had
restrictions that included limits on the quantity of OTC products
dispensed within specified time periods or on the number of times a
prescription could be refilled.  For example, one facility restricted
cough syrup prescriptions to an 8-ounce bottle with one refill.  It
had similar quantity restrictions for 15 other OTC medications. 
Another facility had a no-refill policy for certain medical supplies,
such as diapers, underpads, and bandages. 


   OTHER HEALTH CARE PLANS PROVIDE
   FEW, IF ANY, OTC PRODUCTS
------------------------------------------------------------ Letter :4

Unlike VA, other public and private health care plans cover few, of
any, OTC products for their beneficiaries.  The Department of
Defense, for instance, operates a health care system for military
beneficiaries, including active duty members, retired members, and
dependents, that provides a more restricted number of OTC products
than most VA facilities.  In 1992, Defense eliminated all OTC
products except insulin from its formularies to control costs. 
Subsequently, however, Defense reinstated a few OTC products in its
formularies because physicians had begun substituting more expensive
prescription medications.  All beneficiaries are eligible for covered
OTC products without a copayment. 

The Health Care Financing Administration directs the Medicare and
Medicaid programs that pay nonfederal health care providers for
medical care for people who are elderly, disabled, or poor.  Unlike
VA, Medicare does not cover outpatient OTC medications for its
beneficiaries.  Like VA, Medicaid, at the option of the states, can
cover OTC products for its low-income beneficiaries.  The
availability of OTC products varies by state, ranging from very few
to a substantial array of products. 

The Federal Employees Health Benefits Program offers a range of
health insurance plans to federal employees and their dependents. 
The program requires plans to meet certain minimum standards, which
include coverage for prescription medications but not for OTC
products, except for insulin and related supplies.  Blue Cross and
Blue Shield and Kaiser Permanente, two of the larger plans involved,
cover no OTC products other than insulin and related supplies.  Both
plans require beneficiaries to help cover the cost of prescriptions. 
Kaiser charges $7 for each prescription provided by its pharmacies. 
Blue Cross and Blue Shield requires beneficiaries to pay a $50
deductible and 15 to 20 percent of the cost of individual
prescriptions obtained at retail pharmacies, depending on whether the
beneficiaries have high- or standard-option plans. 

Finally, most private health insurers generally do not cover OTC
products, with a few exceptions such as insulin and insulin syringes. 
For example, the Group Health Cooperative of Puget Sound, in Seattle,
provides insulin with a $5 copayment but no other OTC products. 
Before 1995, the Cooperative provided an OTC drug benefit but dropped
it because no other similar health plan provided this benefit. 


   FEDERAL RESOURCES FINANCE MOST
   OF VA'S OTC COSTS
------------------------------------------------------------ Letter :5

Nationwide, VA pharmacies spent an estimated $117 million to purchase
OTC products and $48 million to dispense them to veterans in fiscal
year 1995.  Of the total $165 million spent, about $85 million was
for medications, with purchasing costs representing about two-thirds
of that amount.  About $74 million was spent for medical supplies and
$6 million for dietary supplements, with purchasing costs accounting
for most of these costs, as shown in figure 1. 

   Figure 1:  VA Nationwide
   Estimated OTC Expenses, Fiscal
   Year 1995

   (See figure in printed
   edition.)

Purchasing and dispensing costs differ among the product categories
for two reasons.  First, VA physicians generally provide more
prescriptions with refills for medications than for supplies, thereby
causing pharmacies to handle medications more often.  Second,
ingredient costs of medications are generally significantly lower
than those of medical supplies. 

VA recovered an estimated $7 million of total OTC costs (about 4
percent) through veterans' copayments.\5 By law, unless they meet
statutory exemption criteria, veterans are to pay $2 for each 30-day
supply of OTC medications and dietary supplements that VA provides. 
Veterans' copayments are not required for any OTC products used to
treat service-connected conditions.  Also, veterans are exempt from
the copayment requirement if they have low incomes. 

Our analysis of veterans' copayments and pharmacy costs at VA's
Baltimore facility showed that copayments offset 7 percent of costs
for OTC products, as shown in table 1. 



                          Table 1
          
          Comparison of Federal and Veteran Shares
             of OTC Expenses at VA's Baltimore
                 Facility, Fiscal Year 1995

                  (Figures are in percent)

                               Dietary
                  Medicati  supplement   Medical
                       ons           s  supplies     Total
----------------  --------  ----------  --------  --------
Federal funds           88          99       100        93
Veteran                 12           1         0         7
 copayments
----------------------------------------------------------
Federal funds financed most of Baltimore's OTC product costs. 
Copayments collected covered a relatively small portion of these
costs for several reasons.  First, the $2 copayment collected for a
30-day supply represented only a portion of the ingredient,
dispensing, and collection costs of most OTC medications and dietary
supplements.  Second, copayments were not required for medical
supplies.  Third, most veterans receiving medications and dietary
supplements were exempted, and some nonexempt veterans did not make
the copayments they owed. 

For individual OTC products, veterans' medication copayments covered
from 4 percent to more than 100 percent of VA's costs, depending on
the type of product and the quantities dispensed.  For example, a
veteran's medication copayment of $6 for a 90-day supply of a
relatively expensive product, such as the dietary supplement Ensure,
may cover about 4 percent of VA's costs.  In contrast, a veteran's
copayment of $6 for a 90-day supply of an inexpensive medication,
such as aspirin, may cover more than VA's total cost. 


--------------------
\5 These copayments are referred to as "medication copayments" but
apply to both medications and dietary supplements.  No copayment is
required for medical supplies. 


   OPPORTUNITIES TO REDUCE FEDERAL
   EXPENDITURES
------------------------------------------------------------ Letter :6

A variety of actions could help reduce the level of federal resources
devoted to the provision of OTC products.  VA pharmacies could
dispense considerably fewer OTC products.  Also, savings could be
achieved through more efficient OTC dispensing and copayment
collection processes.  Finally, the Congress could expand the
copayment requirements to generate additional revenues. 


      DISPENSING FEWER OTC
      PRODUCTS COULD CUT VA'S COST
---------------------------------------------------------- Letter :6.1

VA dispenses OTC products to veterans in several situations.  In
general, VA provides OTC products to treat veterans for
service-connected disabilities.  For the treatment of
nonservice-connected conditions, VA provides OTC products for
hospital-related as well as non-hospital-related situations.  VA
could save money by limiting the situations under which it dispenses
OTC products. 

We identified many hospital-related situations in which VA provided
OTC products.  For example, veterans received phosphate enemas,
magnesium citrate, and prep kits for barium enemas in preparation for
colonoscopies and other diagnostic tests.  Following hospital stays,
veterans received ostomy supplies after some surgeries, wound-care
supplies, aspirin for heart surgery or angioplasties, and
decongestants after sinus surgery. 

We also identified situations in which VA physicians determined that
a veteran would be likely to be hospitalized if OTC products were not
used.  These included diabetic veterans using insulin to control
their blood sugar, veterans suffering renal failure using sodium
bicarbonate tablets to balance their electrolytes, and veterans who
have suffered heart attacks or strokes using aspirin to prevent
secondary occurrences. 

We identified, however, some non-hospital-related situations in which
VA provided OTC products.  These included antacids for heartburn,
preparations for dry skin, acetaminophen for arthritis pain, and
cough medications for common colds.  Given that VA pharmacies filled
prescriptions for such products over 2 million times last year, VA
facilities have an opportunity to reduce costs significantly. 


      INCREASED EFFICIENCY COULD
      REDUCE VA'S COSTS
---------------------------------------------------------- Letter :6.2

VA pharmacies could more efficiently dispense OTC products by
reducing the number of times staff handle these items or by
restricting mail service.  VA facilities could also reduce costs by
collecting medication copayments at the time of dispensing. 


         REDUCING OTC PRODUCT
         HANDLING COSTS
-------------------------------------------------------- Letter :6.2.1

VA pharmacies could significantly reduce their OTC product dispensing
costs of $48 million by providing more economical quantities of
medications and supplies.  Dispensing larger quantities would reduce
the number of times that VA pharmacists fill prescriptions for OTC
products, saving about $3 for each time a product would have
otherwise been dispensed. 

As previously discussed, VA physicians generally prescribe OTC
products to treat acute or chronic conditions or to prevent future
illness.  While prescriptions for acute conditions are generally for
periods of 30 days or less, OTC products used for chronic or
preventive situations are generally prescribed for longer periods. 
For example, in fiscal year 1995, about 1,800 veterans received
aspirin at the Baltimore pharmacy in quantities sufficient for at
least 6 months. 

VA allows pharmacies to dispense most OTC products in quantities
sufficient for a 90-day supply.  Not all pharmacies dispense OTC
products in such economical quantities, however; 15 reported that
they dispense OTC products in 30-day or 60-day supplies. 

Limiting pharmacies to dispensing no more than a 90-day supply is
uneconomical for certain high-volume OTC products used to treat
chronic conditions or to prevent illness.  Dispensing larger
quantities in those instances seems to provide opportunities to
reduce costs.  For example, we estimate that VA's Baltimore pharmacy
could have saved over $8,000 if it had dispensed 180-day supplies of
aspirin to certain veterans in fiscal year 1995.  Assuming a
prescribed usage of 1 aspirin tablet a day, supplying 180 tablets
rather than 90 would be more consistent with the quantities veterans
could purchase from local outlets, which generally stock packages
containing between 100 and 500 tablets. 


         REDUCING OTC MAILING
         COSTS
-------------------------------------------------------- Letter :6.2.2

VA pharmacies could also reduce dispensing costs by using mail
service for only certain situations (such as for veterans who are
housebound or must travel long distances to reach VA facilities) or
requiring veterans to pay shipping charges.  Last year, VA pharmacies
spent about $7.5 million mailing OTC products to veterans. 

VA pharmacies generally encourage veterans to use mail service when
refilling most prescriptions for OTC products.  Almost all pharmacies
mail OTC products, relying on mail service for almost 60 percent of
the 15 million times that OTC products were dispensed last year. 
Some pharmacies have already transferred most of their OTC
prescription refills to VA's new regional mail service pharmacies,
and others will do so when additional regional pharmacies become
operational. 

While mailing costs vary, they can be particularly costly for liquid
items or items that are dispensed in large packages or for long
periods.  For example, one facility reported that mailing a
prescription of liquid antacid cost $2.88 and mailing a case of adult
diapers cost $17.49.  Mailing costs for a year's supply of diapers
could exceed $200.  Some VA facilities cited high mailing costs as
one of the principal reasons for eliminating OTC products from their
formularies. 

Several facilities have attempted to reduce costs by prohibiting the
mailing of certain OTC products, such as cases of liquid dietary
supplements and diapers.  In addition, some facilities reported
switching from liquid products to powders to reduce the weight--and
associated mailing costs--for particular OTC products. 


         STREAMLINING COPAYMENT
         COLLECTIONS
-------------------------------------------------------- Letter :6.2.3

A third way to reduce federal costs is to streamline copayment
collections for OTC products.  VA primarily bills veterans for
copayments, unlike other providers that generally require copayments
to be made at the time that the products are dispensed.  VA
facilities incur administrative costs to prepare and mail bills for
copayments related to OTC products, costs that are significant in
relation to total collections.  A VA-sponsored study estimated that
VA facilities spend about 38 cents for every $1 collected to prepare
medication copayment bills, mail them, and resolve questions.\6

VA facilities generally send an initial bill and three follow-up
bills to veterans who are delinquent in paying.  For OTC products
dispensed to veterans in fiscal year 1995, VA's Baltimore pharmacy
collected about 75 percent of the value of the copayments billed. 
The other 25 percent remained unpaid 5 months past the end of the
fiscal year.  The veterans who had not paid for these products had
not applied for waivers and, as a result, VA officials view them as
able to pay.  If the Baltimore facility's costs approximate the rate
of 38 cents of every $1 collected, it incurred an estimated $26,000
to collect $67,000 for OTC products.  The 25 percent of the
medication copayments that were billed but went unpaid would have
required additional costs to resolve.  Because of the relatively
small outstanding balances for most veterans, VA officials told us
that they are reluctant to continue contacting nonpayers or to pursue
legal or other actions to collect these debts. 

VA has the option of not providing OTC products if a veteran refuses
to make a medication copayment at the time the product is dispensed. 
VA officials, however, told us that it is not their policy to
withhold OTC products from nonpayers for this reason. 

Collecting the copayment at the time a product is dispensed could
eliminate most administrative costs and increase revenues.  Veterans
requesting prescription refills by mail could enclose their
copayments with their requests. 


--------------------
\6 Birch & Davis Associates Inc., Medical Care Cost Recovery Cost of
Collections Study (final report) (Washington, D.C.:  VA, Medical Care
Cost Recovery Program Office, Nov.  21, 1995). 


      VA FACILITIES COULD INCREASE
      RESTRICTIONS ON OTC PRODUCTS
---------------------------------------------------------- Letter :6.3

VA facilities could adopt less generous policies for OTC products
that would be more consistent with other health plans' policies. 
This could be achieved by adopting such cost-containment measures as
limiting the OTC products available or limiting quantities dispensed. 

As previously discussed, each VA facility offers a different
assortment of OTC products.  For example, the most generous OTC
product assortment contains about 285 medications, 514 medical
supplies, and 14 dietary supplements.  In contrast, the least
generous assortment includes about 124 medications, 114 medical
supplies, and 4 dietary supplements. 

Over the last 3 years, 45 pharmacies have reduced the number of OTC
products provided to veterans.  The most commonly removed OTC
products are medications such as soaps, skin lotions, and laxatives;
dietary supplements such as Ensure, multiple vitamins, and mineral
supplements; and medical supplies such as ostomy products and glucose
test strips. 

As part of VA's ongoing reorganization, each of the 22 network
directors has developed a list of OTC products dispensed by
facilities operating in the network.  In general, each network's
formulary more closely approximates the more generous OTC product
assortments available in each network rather than the less generous
assortments.  Some network directors plan to review their formularies
to identify products that could be removed. 

Recently, 58 facilities told us that they are considering removing
some OTC products from their formularies.  Most are examining fewer
than 10 products, although the number of products under review ranges
from 1 to 205.  Products most commonly mentioned include dietary
supplements, antacids, diapers, aspirin, and acetaminophen.  Ninety
facilities are not contemplating changes at this time. 

Interestingly, wide disagreement exists within VA about providing OTC
products on an outpatient basis.  For example, 23 facilities
suggested that all OTC products should be eliminated.  In contrast,
57 suggested that all OTC products should remain available.  The
other 70 facilities provided no opinion regarding whether OTC
products should be kept or eliminated. 

Many facilities pointed out that eliminating all OTC products could
result in greater VA health care costs.  This is because some OTC
products are relatively cheap compared with prescription products
that might be used or because they help prevent significant health
problems that could be expensive for VA facilities to ultimately
treat. 

Facilities reported that were they to remove certain OTC products
from their formularies, greater costs to VA would result.  Of those
21 products reported, the most frequently mentioned were aspirin,
acetaminophen, antacids, and insulin.  These facilities also reported
that 14 of the 21 products had prescription substitutes, among them,
aspirin, acetaminophen, and antacids (insulin has no prescription
substitute). 

While 45 facilities removed OTC products during the last 3 years,
only 6 of them said that they reinstated some products on their
formularies.  One facility stated that although it is commonly
believed that limiting OTC medications would result in a higher use
of more expensive prescription medications, it had not found this to
be true. 

As OTC products are removed from formularies, veterans will have to
obtain the products elsewhere.  Some VA facilities reported that they
are using VA's Canteen Service to provide OTC products that have been
eliminated from their formularies.  The Canteen Service operates
stores in almost every VA facility to sell a variety of items,
including some OTC products.  For example, the Baltimore pharmacy has
asked the Canteen Service store to stock about 13 OTC products that
were recently eliminated from its formulary.  The Baltimore pharmacy
has already shifted most dietary supplements to the store. 

VA Canteen Service stores do not use federal funds to operate and
generally provide items at a discount, in large part because they do
not have the expense of advertising.  By allowing these stores to
sell OTC products, VA may reduce both dispensing and ingredient costs
for its pharmacies.  At the same time, VA's Canteen Service stores
can provide many veterans with a convenient and possibly less costly
option for obtaining these products than other local outlets. 


      EXPANDING VETERAN COPAYMENT
      REQUIREMENTS WOULD ENHANCE
      REVENUES
---------------------------------------------------------- Letter :6.4

The Congress could reduce the federal share of VA pharmacies' costs
for filling OTC prescriptions by expanding copayment requirements. 
This could be achieved through (1) tightening exemption criteria, (2)
requiring copayments for medical supplies, or (3) raising the
copayment amount. 

An example using VA's Baltimore facility shows the different degree
of impact these changes would have.  There, as previously discussed,
veterans' copayments cover only 7 percent of the pharmacy's OTC
costs.  If the copayment were to remain at $2 for each 30-day supply,
changes that expand the number of veterans required to make
copayments could increase the veterans' share of costs up to 31
percent and thereby reduce the pharmacy's share from 93 to 69
percent.  In contrast, a copayment of about $9 would be needed to
achieve a comparable sharing rate if existing exemptions were
maintained. 


         RESTRICTING OTC COPAYMENT
         EXEMPTIONS
-------------------------------------------------------- Letter :6.4.1

Some veterans are required to make copayments, while others are not. 
When the Congress established medication copayments in 1990, veterans
with service-connected disabilities rated at 50 percent or higher
were exempted for any condition as were other veterans who receive
medications for service-connected conditions.  In 1992, the Congress
exempted veterans from the copayment requirement for
nonservice-connected conditions if their income was below a specified
threshold. 

Veterans with service-connected conditions received about one-third
of the 116,000 prescriptions filled at the Baltimore pharmacy.  Of
these, half had disability ratings of 50 percent or higher.  Veterans
without service-connected conditions received the remaining
two-thirds, and about half of these veterans were exempt from making
copayments because their incomes were below the statutory threshold. 
VA officials told us that while some low-income veterans may have
difficulties making copayments, most had not seemed to have such a
problem before the 1992 enactment of the low-income exemption. 

The Baltimore pharmacy could have recovered an additional 7 percent
of its costs if all veterans without service-connected conditions
were required to make copayments for OTC products and an additional
11 percent if veterans were required to make copayments for OTC
products provided for service-connected and nonservice-connected
conditions. 

Using a lower income level in determining which veterans are exempt
from making copayments would also reduce the federal cost of
providing OTC products.  We found that VA facilities were
inappropriately using an income level set at VA's aid-and-attendance
pension rate rather than at the regular pension rate.\7 After we
informed VA's General Counsel of the practice, it issued a May 1996
opinion that the law requires VA facilities to use the regular
pension rate as the income level.  Using this lower income level
should allow facilities to collect copayments from veterans who would
not otherwise have been charged.  (See app.  V for VA's General
Counsel's memorandum on the pension rate.)


--------------------
\7 VA pension rates are income levels established by law and vary by
the number of dependents. 


         REQUIRING OTC COPAYMENTS
         FOR MEDICAL SUPPLIES
-------------------------------------------------------- Letter :6.4.2

Requiring copayments for medical supplies would enhance revenues. 
When the Congress established a copayment requirement for medications
in 1990, it did not include a copayment requirement for medical
supplies.  VA officials told us that they know of no reason why
medical supplies should be treated differently from other product
categories in terms of copayments. 

Nationwide, VA pharmacies dispensed medical supplies about 4 million
times to veterans in fiscal year 1995, including about 36,000 times
at the Baltimore pharmacy.  Baltimore provided most supplies for 30
days or less, generally preceding or following a VA hospital stay. 
Many kinds of supplies, however, were provided for longer term
conditions such as diabetic and ostomy supplies or diapers for those
suffering from incontinence. 

We estimate that the Baltimore facility could have recovered an
additional 6 percent of its OTC product costs in fiscal year 1995 if
veterans had been required to make copayments for medical supplies
used to treat nonservice-connected conditions. 


         RAISING THE OTC COPAYMENT
         AMOUNT
-------------------------------------------------------- Letter :6.4.3

If the exemptions and collection rates remain unchanged, facilities
would need to charge a higher copayment to recover a larger share of
their OTC product costs.  For example, at the Baltimore facility,
recoveries could be raised from 7 percent to 32 percent if the
legislatively established copayment amount were $9 for a 30-day
supply.  If some changes are made to the exemptions, however, this
target share could be achieved with a smaller increase in the
copayment rate, as shown in table 2. 



                          Table 2
          
          Estimated Recoveries as a Percentage of
           the Baltimore Facility's OTC Costs for
              Different Exemption Options and
                         Copayments


Options                 $2      $3      $5      $7      $9
------------------  ------  ------  ------  ------  ------
Existing                7%     11%     18%     25%     32%
 exemptions
Veterans with           14      22      36      51      65
 nonservice-
 connected
 conditions
 (before 1992)
Veterans with           20      30      50      70      90
 nonservice-
 connected
 conditions
 (includes medical
 supplies)
All veterans            31      47      78     109     140
 (includes medical
 supplies and
 veterans with
 service-
 connected
 conditions)
----------------------------------------------------------
Note:  Data are for fiscal year 1995; the Baltimore facility's
estimated OTC costs that year were $1.1 million. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Most VA facilities provide more generous OTC product benefits than
other health care plans.  In addition, VA facilities provide other
features, such as free OTC product mail service, that are not
commonly available from other plans.  As a result, VA facilities
devote significant resources to the provision of OTC products that
other plans have elected not to spend. 

VA should be commended for instructing network directors to
consolidate formularies.  This action, which is currently in
progress, has not yet achieved an adequate level of consistency or
cost-containment systemwide because the networks' current formularies
approximate the more generous coverage of OTC products at some VA
facilities.  Moreover, some networks are permitting facilities to
provide less generous coverage of OTC products than these networks'
formularies allow.  This is likely to perpetuate the uneven
availability of OTC products. 

Given the disagreement among networks and facilities over the
provision of OTC products, additional guidance may be needed to
ensure that veterans have a consistent level of access to OTC
products systemwide.  In light of concerns about potential resource
shortages at some facilities, tailoring the availability of OTC
products for nonservice-connected conditions to be more in line with
that at less generous facilities would seem desirable.  This would
essentially limit OTC products to those most directly related to VA
hospitalizations. 

VA facilities could also reduce their costs if they restructured OTC
product dispensing and copayment collection processes.  In general,
most facilities dispense OTC product refills too frequently, mail
products too often, and allow veterans to delay copayments too
frequently.  Although some facilities have adopted measures to
operate more efficiently, all facilities could benefit by doing so. 

VA facilities should be able to collect copayments for OTC products
from more veterans if they use the appropriate income threshold to
determine which veterans owe copayments.  In May 1996, VA's General
Counsel concluded that the income threshold, as prescribed by law,
should be the regular pension rate for most cases, not the higher
aid-and-attendance rate.  VA facilities had been using the higher
aid-and-attendance rate. 

Expanding veterans' share of the costs would also help reduce federal
resource needs.  This could be achieved by expanding copayment
requirements to include medical supplies, reducing the income
threshold for veterans with nonservice-connected conditions, or
increasing the amount of copayment required.  In addition to
enhancing revenues, such changes could also act as important
incentives for veterans to obtain only the OTC products from VA
facilities that they expect to use. 

Finally, some VA facilities have had success using the Canteen
Service stores to stock and sell OTC products that the facilities had
removed from their formularies.  This seems to be a reasonable
alternative for providing OTC products to veterans at costs below
those of other local outlets. 


   MATTERS FOR CONSIDERATION BY
   THE CONGRESS
------------------------------------------------------------ Letter :8

The Congress could reduce federal expenditures for OTC products
provided to veterans by amending 38 U.S.C.  1722A to

  -- increase the medication copayment amount;

  -- expand the coverage of the medication copayment to include
     medical supplies; or

  -- lower the income threshold VA uses to determine which veterans
     owe medication copayments. 


   RECOMMENDATIONS TO THE
   SECRETARY
------------------------------------------------------------ Letter :9

We recommend that the Secretary of Veterans Affairs require the Under
Secretary of Health to

  -- limit OTC products for nonservice-connected conditions to those
     most directly related to VA hospitalizations or those considered
     most essential to prevent hospitalization;

  -- standardize the availability of OTC products to give veterans
     more consistent levels of access to them systemwide;

  -- reduce VA's dispensing costs for OTC products by (1) providing,
     when appropriate, more economical quantities (more than a 90-day
     supply) of medications and supplies and (2) limiting mail
     service to certain situations;

  -- require veterans to make copayments at the time OTC products are
     dispensed; and

  -- direct facilities to apply the statutory income threshold to
     determine which veterans owe medication copayments. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :10

In commenting on a draft of our report, VA's Under Secretary for
Health agreed to standardize the availability of OTC products
nationwide and estimated this will be done by May 1997.  VA also
agreed to use the statutory income threshold (the regular pension
rate) instead of the aid-and-attendance rate to determine which
veterans should be exempt from medication copayments.  VA estimated
that most veterans who were previously exempt from the medication
copayment because of their income levels will now be required to make
payments.  However, VA expressed disagreement with our other
recommendations. 

Our recommendations were intended to identify ways that VA could
conserve OTC pharmaceutical resources so that they could be
redirected to provide more essential health care services for
veterans.  VA faces serious budget challenges today and in the
future.  These challenges are forcing management to make choices
about how to best use limited resources to maintain the present level
of health care services for veterans.  Nationwide, VA's managers are
faced with taking every reasonable action to ensure that they are
providing high-quality medical care in a cost-effective manner.  Our
recommendations, for the most part, were based on actions certain VA
pharmacies have already taken. 


      LIMITING OTC PRODUCTS
--------------------------------------------------------- Letter :10.1

VA did not concur with our recommendation to limit OTC products for
nonservice-connected conditions to those most directly related to VA
hospitalizations or those considered most essential to prevent
hospitalization.  VA stated that its policy to provide patients with
medications, medical supplies, and dietary supplements is based on
the clinical determination that these items are medically necessary. 
VA pointed out that continuity of care is a cornerstone of primary
care practice with emphasis on preventive care and asserted that
implementation of this recommendation would probably lead to
fragmented care.  VA stated that fragmentation of care can lead to an
overall increase in health care costs.  Restriction of OTC products
could also lead to a shift in prescribing patterns.  To ensure that
the patient will actually get the needed medication, physicians may
order more expensive prescription items if OTC versions are not
provided by VA pharmacies, a practice that would lead to increased
overall expenditures. 

Our recommendation was designed to bring VA's provision of OTC
products into closer alignment with the practices of the vast
majority of health care plans in this country.  Generally, private
health care plans provide primary care but exclude OTC products as a
benefit for their participants--that is, they expect enrollees to
obtain OTC products from other sources at their own expense. 
Furthermore, what we are recommending is that VA do on a systemwide
basis what several of its own facilities have done.  VA's local
facilities generally factor in drug substitution and potential health
effects when making their decisions about which drugs to provide. 
Some of them have already made the tough choices about which OTC
drugs were essential to provide, and they did not report
encountering, to any great extent, the types of potential problems
that VA expressed concern about in its comments.  Limiting VA
pharmacies' provision of certain OTC items presumes that veterans
will obtain the items from other local outlets if they share their
physicians' assessment of the products' medical necessity. 


      DISPENSING MORE ECONOMICAL
      QUANTITIES
--------------------------------------------------------- Letter :10.2

VA agreed that OTC products should be provided in more economical
quantities to reduce VA's dispensing costs but only in those
instances deemed clinically appropriate.  VA stated that the current
medication renewal process often serves as a good opportunity for the
patient to have personal contact with the health care provider and to
be reevaluated for medication compliance.  VA also stated that
quantity limitation must be based on quality of care considerations
and the individual veteran's ability to comply with his or her
medication regimen.  Also, consideration must be given to the
stability of the drug in question. 

Our recommendation was intended to reduce the dispensing costs
associated with OTC products and touches on prescription refills
rather than prescription renewals.  For chronic conditions, VA
prescriptions are usually written for 6- or 12-month periods with
refills.  Renewing the prescriptions once or twice a year does
provide opportunities for veterans to see VA health care
practitioners, but refilling those prescriptions every 90 days in the
interim does not.  VA pharmacy officials told us that routine refills
are generally handled by mail with no interaction between physicians
and veterans. 

Analgesics, such as aspirin and acetaminophen, which VA dispensed
almost 3 million times in fiscal year 1995, provide an example of how
refill quantities influence costs.  VA could save about $3 in
dispensing costs each time it provided one 180-day supply instead of
two 90-day supplies.  When sold in local outlets, aspirin is commonly
packaged in quantities of 100 to 500 tablets, making it possible for
veterans and others to readily buy more than 180-day supplies without
raising concerns about medical safety or product stability.  OTC
products are safe when the manufacturers' labeling directions are
followed and, as in the case of aspirin, are stable enough to be
stored in users' homes for 6 months or longer without adverse
consequences. 


      LIMITING MAIL SERVICE
--------------------------------------------------------- Letter :10.3

VA did not concur with our recommendation to reduce VA's dispensing
costs for OTC products by limiting mail service to certain
situations.  VA stated that implementing this recommendation would
undermine the important health care goals of patient satisfaction and
customer service.  Also, VA stated that mail service helps to reduce
daily crowding and congestion in ambulatory care and parking areas of
VA treatment facilities. 

When resources are limited, choices about whether to fund certain OTC
products have to be made by local VA pharmacies.  Some VA pharmacies
reported to us that they continued to provide certain OTC products,
such as cases of liquid dietary supplements or diapers, but did not
mail them.  Veterans needing such OTC products have to pick them up
at the pharmacy (exceptions are made when warranted).  Again, we are
only recommending that VA do, on a systemwide basis, what several of
its facilities have done independently. 


      COLLECTING COPAYMENTS WHEN
      PRODUCTS ARE DISPENSED
--------------------------------------------------------- Letter :10.4

VA did not concur with our recommendation to require veterans to make
copayments at the time OTC products are dispensed.  VA stated that to
the fullest extent possible, veterans are encouraged to make
copayments at the time OTC products are dispensed.  An estimated 35
percent of prescription copayments are collected at the time of
dispensing.  Because approximately 50 percent of all outpatient
prescriptions are mailed, VA stated, it is obvious that copayment
collection rates at the time of dispensing are already high. 
Collection decisions must be made on an individual basis, according
to VA, which stated that a veteran will not be denied a medically
necessary product if for some reason copayment cannot be made at the
time the product is dispensed. 

During our examination of the copayment process at the VA facility we
visited, however, we found that veterans were not presented a
copayment bill or required to make payments at the time OTC products
were dispensed at the pharmacy.  Instead, the facility primarily
mailed copayment bills to veterans, incurring additional
administrative costs.  Because VA's records showed only total
copayment collections, copayments received by mail or collected by
the cashier could not be differentiated. 

Our work showed that about 25 percent of OTC copayments billed were
uncollected.  VA incurs additional administrative costs to pursue
these uncollected copayments.  Collecting the copayments for OTC
products at the time of dispensing would eliminate the administrative
costs to bill and rebill delinquent payers.  Veterans could help
conserve VA's limited resources by making copayments when they pick
up the OTC products at the pharmacy or by including their copayments
when ordering refills by mail.  Given current copayment rates of $2
for a 30-day quantity, our recommendation would not seem to be overly
burdensome on veterans.  The full text of VA's comments is in
appendix VI. 


--------------------------------------------------------- Letter :10.5

We are sending copies to appropriate congressional committees; the
Secretary of Veterans Affairs; the Director, Office of Management and
Budget; and other interested parties.  We will also make copies
available to others upon request. 

Please call me on (202) 512-7101 if you or your staff have any
questions concerning this report.  Contributors to this report are
listed in
appendix VII. 

Sincerely yours,

David P.  Baine
Director, Veterans' Affairs and
 Military Health Care Issues




(See figure in printed edition.)Appendix I
GAO QUESTIONNAIRE RESULTS
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


VA FACILITIES BY THE TOTAL NUMBER
OF UNIQUE OTC PRODUCTS DISPENSED,
FISCAL YEAR 1995
========================================================== Appendix II

                               Dietary               Total
VA facility       Medicati  supplement   Medical       OTC
location               ons           s  supplies  products
----------------  --------  ----------  --------  --------
Livermore, CA           80           1        82       163
Fort Howard, MD        110           4        84       198
Canandaigua, NY        112           2        88       202
Coatesville, PA        135           6        77       218
Montrose, NY           161           2        70       233
Bath, NY               142           4        87       233
Beckley, WV            110           6       123       239
Knoxville, IA          154          10        85       249
Tuskegee, AL           115           5       129       249
Big Spring, TX         112           2       137       251
Newington, CT           68           3       180       251
Marion, IN             137           2       117       256
Fort Lyon, CO          140           5       120       265
Sheridan, WY           137           3       129       269
Clarksburg, WV         119           1       154       274
Perry Point, MD        141           4       135       280
Tomah, WI              138           3       140       281
Dublin, GA             131           2       148       281
Poplar Bluff, MO       134           3       165       302
Pittsburgh (HD),       169           7       135       311
 PA
Los Angeles OPC,       173           1       139       313
 CA
Cheyenne, WY           177           6       132       315
Alexandria, LA         129           4       184       317
Saginaw, MI            116           6       197       319
Bronx, NY              159           3       161       323
Miles City, MT         151           5       167       323
Grand Island, NE       154           4       166       324
White City, OR         150           3       175       328
Hot Springs, SD        149           5       177       331
Fort Meade, SD         138           4       190       332
Marion, IL             134           5       195       334
Bonham, TX             194           2       143       339
Butler, PA             148           3       194       345
Montgomery, AL         169           0       177       346
Chillicothe, OH        129           5       212       346
Danville, IL           143           4       199       346
Altoona, PA            125          11       212       348
Memphis, TN            166           8       176       350
Lyons, NJ              181           4       166       351
Fayetteville, NC       138           3       214       355
Northport, NY          181           5       170       356
Prescott, AZ           144           0       214       358
Tuscaloosa, AL         187          11       160       358
Anchorage, AK          137           9       213       359
Castle Point, NY       147           5       207       359
American Lake          150           6       205       361
 and Seattle, WA
Fort Wayne, IN         132           7       224       363
Asheville, NC          162          20       184       366
Salt Lake City,        157           6       204       367
 UT
Wilmington, DE         161          11       195       367
Biloxi, MS             151           6       212       369
Grand Junction,        183           9       179       371
 CO
Ann Arbor, MI          125           5       242       372
Kerrville, TX          206           3       165       374
Northampton, MA        187          15       175       377
Iron Mountain,         203           4       172       379
 MI
San Juan, PR           152          11       217       380
Chicago                163           6       213       382
 (Lakeside), IL
Walla Walla, WA        157           9       218       384
North Chicago          163           9       214       386
 (Downey), IL
Batavia, NY            182           3       209       394
Manchester, NH         198           5       193       396
Erie, PA               165          16       215       396
El Paso OPC, TX        208           4       193       405
Hampton, VA            164           0       243       407
Fayetteville, AR       145          10       252       407
Bedford, MA            241           6       166       413
Durham, NC             157           8       250       415
Lake City, FL          180           9       227       416
Fargo, ND              169           9       239       417
Shreveport, LA         164          10       244       418
St. Cloud, MN          181           8       232       421
Hines, IL              158          12       262       432
Fort Harrison,         142           4       287       433
 MT
Providence, RI         145           7       286       438
Fresno, CA             178           9       257       444
Brockton/West          182           9       257       448
 Roxbury, MA
Huntington, WV         167           6       283       456
Honolulu, HI           189          15       256       460
Battle Creek, MI       171          17       273       461
Murfreesboro, TN       164          11       286       461
West Palm Beach,       177           5       283       465
 FL
New York, NY           254           7       204       465
San Francisco,         181           9       280       470
 CA
Pittsburgh (UD),       162          12       298       472
 PA
Topeka, KS             213           9       253       475
Denver, CO             150          11       314       475
Mountain Home,         181           9       287       477
 TN
Chicago                205           7       266       478
 (Westside), IL
Columbus OPC, OH       104           1       379       484
Roseburg, OR           171           1       315       487
Jackson, MS            221          10       256       487
Sepulveda, CA          197           4       289       490
Columbia, SC           197           9       285       491
Las Vegas OPC,         162           5       326       493
 NV
Baltimore, MD          241          12       243       496
West Haven, CT         179          11       307       497
Little Rock, AR        195           3       302       500
Syracuse, NY           163          11       326       500
Cincinnati, OH         182           5       317       504
New Orleans, LA        179           9       316       504
Buffalo, NY            166          10       332       508
Leavenworth, KS        216           7       288       511
Augusta, GA            234          11       266       511
Richmond, VA           192          13       316       521
Phoenix, AZ            245           6       271       522
Sioux Falls, SD        236           3       283       522
Dayton, OH             177          11       336       524
Loma Linda, CA         188           8       331       527
Birmingham, AL         229          14       285       528
Reno, NV               232           4       292       528
Martinez, CA           193          19       319       531
Brooklyn, NY           302          12       222       536
Amarillo, TX           283           2       260       545
Madison, WI            141          19       394       554
Philadelphia, PA       230           9       315       554
White River            172          11       380       563
 Junction, VT
Spokane, WA            265          11       289       565
Tampa, FL              197          10       364       571
San Diego, CA          178           6       391       575
Oklahoma City,         242           3       333       578
 OK
Martinsburg, WV        286          11       281       578
Omaha, NE              224           3       352       579
Lexington, KY          210          14       357       581
Albuquerque, NM        246           7       339       592
East Orange, NJ        204          12       381       597
San Antonio, TX        354          17       227       598
Boise, ID              306          14       286       606
Boston, MA             268          15       331       614
Gainesville, FL        187          16       412       615
Louisville, KY         235          11       372       618
Lincoln, NE            258           8       355       621
Houston, TX            246          12       364       622
Wichita, KS            218           9       399       626
Iowa City, IA          234          12       384       630
Tucson, AZ             241          27       366       634
Central Texas          307          16       311       634
 Health Care
 System, TX
Dallas, TX             225          18       392       635
Charleston, SC         212          14       421       647
Atlanta, GA            252          10       386       648
Washington, DC         245           5       402       652
Muskogee, OK           272          12       370       654
Cleveland, OH          234           9       417       660
Miami, FL              238          19       422       679
West Los Angeles       296          11       393       700
 (Wadsworth), CA
Wilkes-Barre, PA       314          12       381       707
Allen Park, MI         218           6       484       708
Togus, ME              280           9       421       710
Columbia, MO           249          11       454       714
Kansas City, MO        276           8       433       717
Long Beach, CA         312          16       405       733
Salem, VA              343          11       387       741
Des Moines, IA         299           9       435       743
Portland, OR           210           8       567       785
Nashville, TN          284          22       494       800
Minneapolis, MN        277          12       518       807
Milwaukee, WI          192          11       612       815
Lebanon, PA            395          21       405       821
Salisbury, NC          392          22       407       821
Puget Sound            242           9       570       821
 Health Care
 System, WA
Bay Pines, FL          229           7       604       840
Palo Alto, CA          241          14       615       870
Indianapolis, IN       267          34       624       925
St. Louis, MO          347          13       580       940
Albany, NY             297          15       631       943
----------------------------------------------------------
Note:  OPC = outpatient clinic; HD = facility on Highland Drive,
Pittsburgh; UD = facility on University Drive, Pittsburgh. 


PERCENTAGE OF PHARMACY WORKLOAD
ATTRIBUTABLE TO OTC PRODUCTS,
FISCAL YEAR 1995
========================================================= Appendix III

                                             Percentage of
                                         pharmacy workload
VA facility location                      for OTC products
--------------------------------------  ------------------
West Haven, CT                                           7
Alexandria, LA                                           8
Kerrville, TX                                            8
Asheville, NC                                            9
Fresno, CA                                              12
Madison, WI                                             13
San Diego, CA                                           14
Roseburg, OR                                            14
Saginaw, MI                                             14
Shreveport, LA                                          15
West Palm Beach, FL                                     15
Atlanta, GA                                             15
Pittsburgh (HD), PA                                     16
Fargo, ND                                               17
Hampton, VA                                             17
Temple, TX                                              17
Miles City, MT                                          17
Providence, RI                                          18
Sheridan, WY                                            18
Salem, VA                                               18
Poplar Bluff, MO                                        18
Allen Park, MI                                          18
Loma Linda, CA                                          18
Minneapolis, MN                                         18
Denver, CO                                              18
New Orleans, LA                                         18
Buffalo, NY                                             18
Tuscaloosa, AL                                          18
Northport, NY                                           19
Ann Arbor, MI                                           19
Fort Harrison, MT                                       19
Muskogee, OK                                            19
Des Moines, IA                                          19
San Francisco, CA                                       19
Salt Lake City, UT                                      19
Big Spring, TX                                          20
Canandaigua, NY                                         20
Biloxi, MS                                              20
Tucson, AZ                                              20
Bath, NY                                                20
Baltimore, MD                                           20
Beckley, WV                                             20
Louisville, KY                                          20
Fayetteville, AR                                        20
Chillicothe, OH                                         20
Albany, NY                                              20
Reno, NV                                                20
Phoenix, AZ                                             20
Philadelphia, PA                                        20
Memphis, TN                                             21
Battle Creek, MI                                        21
Amarillo, TX                                            21
Hines, IL                                               21
Grand Junction, CO                                      21
White River Junction, VT                                21
Altoona, PA                                             21
Erie, PA                                                21
Wichita, KS                                             21
Birmingham, AL                                          21
West Los Angeles (Wadsworth), CA                        21
Little Rock, AR                                         21
Togus, ME                                               21
Albuquerque, NM                                         21
Knoxville, IA                                           22
Leavenworth, KS                                         22
Montrose, NY                                            22
Mountain Home, TN                                       22
Walla Walla, WA                                         22
Lyons, NJ                                               22
Marion, IL                                              22
Montgomery, AL                                          22
Fort Lyon, CO                                           22
Durham, NC                                              22
Bay Pines, FL                                           22
American Lake and Seattle, WA                           22
Danville, IL                                            22
Fort Wayne, IN                                          23
Cincinnati, OH                                          23
Boise, ID                                               23
Dallas, TX                                              23
Boston, MA                                              23
Dublin, GA                                              23
Brooklyn, NY                                            23
Northampton, MA                                         23
Coatesville, PA                                         23
Cheyenne, WY                                            23
Huntington, WV                                          23
Lexington, KY                                           23
Kansas City, MO                                         23
Lake City, FL                                           23
Chicago (Lakeside), IL                                  23
Palo Alto, CA                                           24
Jackson, MS                                             24
Bedford, MA                                             24
Tomah, WI                                               24
Omaha, NE                                               24
Dayton, OH                                              24
Marion, IN                                              24
Grand Island, NE                                        24
Fort Meade, SD                                          24
Clarksburg, WV                                          24
Syracuse, NY                                            24
Sepulveda, CA                                           24
Salisbury, NC                                           24
Cleveland, OH                                           24
Sioux Falls, SD                                         25
San Antonio, TX                                         25
Brockton/West Roxbury, MA                               25
Spokane, WA                                             25
Lincoln, NE                                             25
Iowa City, IA                                           25
New York, NY                                            25
Bonham, TX                                              25
North Chicago (Downey), IL                              25
St. Louis, MO                                           26
Manchester, NH                                          26
St. Cloud, MN                                           26
Charleston, SC                                          26
Washington, DC                                          26
East Orange, NJ                                         26
Oklahoma City, OK                                       27
Tampa, FL                                               27
Wilmington, DE                                          27
Butler, PA                                              27
Prescott, AZ                                            27
Augusta, GA                                             27
Fayetteville, NC                                        27
Tuskegee, AL                                            27
Indianapolis, IN                                        27
Wilkes-Barre, PA                                        28
Pittsburgh (UD), PA                                     28
Columbia, MO                                            28
Hot Springs, SD                                         28
Houston, TX                                             28
Portland, OR                                            29
Milwaukee, WI                                           30
Richmond, VA                                            30
Miami, FL                                               30
Bronx, NY                                               31
Long Beach, CA                                          32
Gainesville, FL                                         32
Nashville, TN                                           32
Murfreesboro, TN                                        32
Topeka, KS                                              33
Chicago (Westside), IL                                  33
Martinsburg, WV                                         33
Castle Point, NY                                        34
Columbia, SC                                            34
Lebanon, PA                                             41
Iron Mountain, MI                                       47
----------------------------------------------------------
Notes:  We calculated the percentage of pharmacy workload for OTC
products for facilities that responded to our OTC questionnaire. 

HD = facility on Highland Drive, Pittsburgh; UD = facility on
University Drive, Pittsburgh. 

Source:  GAO calculations based on Department of Veterans Affairs and
GAO survey data. 


100 COMMONLY DISPENSED OTC
PRODUCTS THAT ACCOUNTED FOR ABOUT
70 PERCENT OF THE OTC WORKLOAD,
FISCAL YEAR 1995
========================================================== Appendix IV



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

Source:  Department of Veterans Affairs. 




(See figure in printed edition.)Appendix V
DEPARTMENT OF VETERANS AFFAIRS
OFFICE OF GENERAL COUNSEL'S
OPINION ON THE LOW INCOME
EXEMPTION FROM THE PHARMACY
COPAYMENT
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
VETERANS AFFAIRS
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)

because of legislative changes to VA's eligibility rules passed by
the Congress on September 28, 1996. 



(See figure in printed edition.)


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================= Appendix VII

GAO CONTACTS

Paul Reynolds, Assistant Director, (202) 512-7101
Walter Gembacz, Senior Evaluator, (202) 512-6982

ACKNOWLEDGMENTS

In addition to those named above, the following individuals made
important contributions to this report:  Mike O'Dell, Mark Trapani,
Paul Wright, Deena El-Attar, and Joan Vogel. 


*** End of document. ***