Pharmaceutical manufacturers that produce drugs in non-designated countries under the Trade Agreements Act (TAA) may now have an opportunity to increase their sales to the United States government. The Department of Veterans Affairs (VA) recently announced its new policy to require the listing of “all covered drugs, regardless of country of substantial transformation” on VA Schedule 65 I B, expanding coverage of drugs produced abroad.

The VA’s Federal Supply Schedule (FSS) service supports the health care requirements of the VA and other federal government agencies by making over one million commercial products and services available to federal customers. The VA currently manages multiple award contracts for medical equipment, supply, pharmaceutical, and service Schedule programs. VA Schedule 65 I includes drugs, pharmaceuticals, and hematology related products.

This recent change represents a significant shift in policy. Previously, drugs manufactured in a country with which the United States does not have a trade agreement in place were excluded from Schedule 65 I contracts. The former policy required that all products offered under a VA FSS contract be U.S.-made or substantially transformed, designated country end products under the TAA, meaning that federal customers could not purchase drugs manufactured or substantially transformed in a country such as China, India, or Malaysia. Now, however, the VA can make use of a TAA exception allowing the government to purchase non-TAA-compliant products if no products that comply with the TAA are available, and a VA contracting officer can issue individual non-availability determinations for any drugs covered by Schedule 65 I B that are only available from a non-TAA country.

Although the VA’s announcement provided few details about the procedures for such determinations, and deadlines for listing non-TAA-compliant covered drug products are tight, the change in policy could provide significant government sales opportunities for drug manufacturers that sell non-TAA-compliant products. More information about the Trade Agreement Act requirements and the process for current VA Schedule 65 I B contractors to add drugs and other products to their existing FSS contracts is available here.