No One Checked VA's $322M in Off-Contract Drug Purchases

The Veterans Health Administration -- the arm of the Department of Veterans Affairs⧉ that runs VA hospitals and clinics -- spent $322.5 million buying pharmaceuticals outside its negotiated prime-vendor contract⧉ from April 2024 through March 2025, a VA Office of Inspector General audit⧉ released in June 2026 found.▸ That's about 3% of VA's $11.7 billion annual pharmacy budget -- a small share of the money, but the OIG's sample review found VHA facilities routinely could not document why they'd gone around the contract built to get them the best price, or whether the price they paid instead was reasonable at all.

VA buys most of its drugs through a single contracted distributor -- the prime vendor -- that leverages the government's collective buying power under Federal Supply Schedule pricing.▸ VHA Directive 1108.07(2) requires the prime vendor be the first source for every contract pharmaceutical purchase⧉; only when an item isn't available there can procurement staff turn to the open market, and even then VA policy requires them to document that unavailability and research prices to ensure the government gets a fair deal. The OIG reviewed $276.7 million of the $322.5 million⧉ in off-contract spending -- about 660,000 government purchase-card transactions -- leaving out $45.9 million routed through VA's mail-order pharmacies, which fell outside the audit's scope.

Of the estimated 534,000 genuine open-market transactions in the reviewed pool, about 250,000 were for items the prime vendor was actually contracted to carry.▸ For 207,000 of those 250,000 -- 83%⧉ -- facility staff could not produce evidence they'd even attempted the prime vendor first, even though placing an order through the vendor's site (and letting it bounce as unfulfillable) is itself the documentation policy asks for. The failure runs wider than that one step: staff could not show they'd conducted market research to confirm a fair price for 495,000 of 534,000 transactions -- 93% of all open-market buys, worth an estimated $138.9 million⧉.

Staff told auditors that pulling multiple cost estimates and saving the paperwork was too time-consuming, and that they had no standard vendor list to check against; approving officials, meanwhile, said their reviews mostly confirmed a purchase was pharmaceutical and correctly priced on the invoice -- not that it was the best available deal.

The OIG put a number on part of the price gap: comparing 246 pharmaceuticals bought through the prime vendor's own open-market listing against the vendor's contract price for the identical item, it found about 120 priced at least 50% higher on the open market⧉, for an estimated $458,000 in avoidable spending -- averaging roughly $3,800 per overpriced drug across that sample.▸ The report's largest published example: one pharmaceutical selling for $733 a unit on the prime vendor's open-market page against a $72 contract price for the same item, a 10-fold markup for going through the identical vendor's identical website the wrong way.

A smaller, concrete instance shows how the gap plays out in real time: in April 2024, a National Acquisition Center pharmacist emailed pharmacy staff that facilities were paying $42.91 on the open market for a product the prime vendor sold for $19.96⧉, after facilities had already bought over $7,000 of it that way in a single week -- about $3,800 in avoidable cost from one email's worth of purchases.

The deepest problem isn't any single overpriced purchase -- it's that most of the $322.5 million had no one assigned to look at it at all.▸ A National Acquisition Center clinical pharmacist reviewed $125.1 million (39%) of the total⧉, but only purchases made through the prime vendor's own open-market storefront, and only at the level of broad spending trends flagged in weekly emails -- not whether any individual facility had tried the contract first or documented its research. Neither the National Acquisition Center nor VHA's Pharmacy Benefits Management Service reviewed the remaining $197.4 million -- 61% of the total⧉ -- because both consider tracking those purchases a facility-level responsibility that, per the audit, no facility-level process actually performs.

That blind spot has a second cost beyond price: it let an estimated 111,000 of the 660,000 transactions VA had flagged as pharmaceutical purchases turn out to be for something else entirely, like medical supplies -- misclassifications VA's own financial-reporting policy says should not happen.

This isn't a new complaint arriving out of nowhere.▸ The OIG's own summary points to two 2025 executive orders⧉ -- one ordering agency payment-justification systems and a one-time 30-day freeze on employee credit cards, the other pushing agencies toward cheaper commercial purchasing -- as evidence that "recent executive orders emphasize the need for more transparency and tighter controls over government spending, including government purchase cards," and frames its recommendations as carrying that direction into VA's pharmacy program specifically. The auditors visited seven medical centers -- Buffalo, Tampa, Bay Pines, Philadelphia, Lebanon, Alexandria, and Amarillo -- and interviewed more than 70 staff to reach their findings, then checked a second data set from October through December 2025 and found the same undocumented pattern still running.