On August 15, 2019, the Defense Health Agency (“DHA”) and Defense Logistics Agency (“DLA”) agreed upon a joint approach to healthcare logistics. Under the Memorandum of Agreement (“MOA”), DLA will be responsible for materiel acquisitions, while DHA will take the lead on medical services acquisitions. The MOA clarifies the agencies’ complementary roles and responsibilities and avoids duplication of effort. The MOA covers all aspects of medical logistics support provided by DLA to DHA, and DHA’s consideration for that support in performance areas including pharmaceuticals, medical-surgical supplies, healthcare technology equipment, cataloging, and Class VIII surge and sustainment materiel required by the services to meet the demands of the national military support strategy.

The uninformed might question the need for DHA and DLA to formally enter into a MOA. After all, DHA and DLA are both under the Department of Defense (‘DoD”) umbrella. Why is an agreement required to coordinate the two agencies’ efforts? Why wasn’t such coordination and avoidance of duplication of effort simply ordered by DoD senior command? Good questions perhaps, but the MOA was necessary to ensure the agencies stay in their respective lanes.

The Military Health System (“MHS”) is going through metamorphic changes. Currently, DHA is in the process of assuming the administration and management responsibilities from the Army, Navy, and Air Force for all military hospitals and clinics (“MTFs”). Congress has required this combination of specific service branch MTFs into unified medical centers run by DHA to be completed by October 1, 2019. The combination process is being implemented beginning on the East Coast and moving West. At the same time, DoD is implementing a massive electronic health records (“EHR”) system upgrade called MHS Genesis. The MHS Genesis integration effort is being deployed starting on the West Coast and moving East. In this context, it makes sense for DHA and DLA to formalize their respective healthcare logistics responsibilities.

What about Coordination with the Department of Veterans Affairs?

For years, almost annually, Congress has urged DoD and the Department of Veterans Affairs (“VA”) to combine efforts when procuring healthcare supplies, including prescription drugs, and services. Over the years, DoD and the VA have politely resisted such coordination efforts citing differing missions; differences in patient populations resulting, for example, in varying drug needs; and the fact that the Departments’ cultures have created rivalries, making it difficult for them to work together on mutually beneficial tasks. Even when the departments have agreed to work together, there were few tangible results. For example, in a 1993 MOA, DoD and the VA agreed to combine identical medical supply requirements from both agencies and leverage that volume to negotiate better pricing and eliminate duplication of contracting. In the MOA, it was agreed that DoD distribution and pricing agreements (“DAPA”) would be phased out as quickly as possible in favor of VA contractual vehicles.

DoD and the VA have taken advantage of some synergies. For example, in October 2010, the departments integrated healthcare facilities in North Chicago that were only 1.5 miles apart into a first-of-its-kind facility known as the Captain James A. Lovell Federal Health Care Center (“FHCC”). The FHCC, intended to be a model to be followed for future collaborations, is the first healthcare center with a joint governance structure, a joint funding source, and an integrated workforce. In March 2019, the FHCC began using DLA Troop Support Medical Supply Chain’s Medical/Surgical Prime Vendor program. This marked the first time a VA-administered medical facility will use the DLA Troop Support Medical program to acquire medical and surgical items. The DLA program offers faster access to a much broader catalog of medical supplies. And, more recently, DoD and the VA coordinated procurement efforts to deploy the same EHR systems. Further, in January 2018, the VA began transitioning to the DLA Medical Supply Chain’s Electronic Catalogue (“ECAT”). Interestingly, this move is completely opposite of the departments’ 1993 MOA.

In the end, one would hope that, after the DoD completes combining MTFs and implementing its new EHR system, serious coordination with the VA is next on the list. In the meantime, medical companies need to stay in contact with their government customers to confirm and understand procurement pathways. For example, companies that supply medical equipment through a DHA contract need to ask how their contract will be transitioned to DLA. Similarly, companies that have significant Federal Supply Schedule (“FSS”) sales to the VA need to make sure their product offerings are available through DLA’s ECAT. Communication with your government customers and contracting officers is the best way to avoid surprises.