Department of Veterans Affairs 

Office of Inspector General 

Audit of 

VA Consolidated Mail 

Outpatient Pharmacy 

Inventory Accountability 

Report No. 08-02730-133 May 28, 2009

VA Office of Inspector General 

Washington, DC 20420 
To Report Suspected Wrongdoing in VA Programs and Operations 

Telephone: 1-800-488-8244 between 8:30 and 4:00 PM Eastern Time, 

Monday through Friday, excluding Federal Holidays 

E-mail: vaoighotline@va.gov
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Table of Contents 

Page 

Executive Summary .................................................................................................... i-v

Introduction

Purpose ............................................................................................................................ 1

Background...................................................................................................................... 1

Scope and Methodology .................................................................................................. 3

Results and Conclusions ............................................................................................. 7

Inadequate Inventory Management Controls of Non-Controlled 

Pharmaceuticals Diminishes CMOP Inventory Accountability............................... 8

Weak Internal Controls for System Access to Non-Controlled 

Pharmaceuticals Increase Risk of Diversion ......................................................... 12

Other Matters Reported ................................................................................................. 14 

Recommendations ....................................................................................................... 15

Appendixes

 A. CMOP Inventory Analysis Results .......................................................................... 17 

 Charleston CMOP Inventory Analysis Results September 2008........................... 17

 Dallas CMOP Inventory Analysis Results August 2008 ...................................... 18 

 Dallas CMOP Inventory Analysis Results October 2008 ...................................... 19

B. Under Secretary for Health Comments .................................................................... 20

C. OIG Contact and Staff Acknowledgments ............................................................... 25

D. Report Distribution ................................................................................................... 26

VA Office of Inspector General 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Executive Summary 

Results in Brief 

The VA Office of Inspector General (OIG) conducted an audit to determine whether 

VA’s Consolidated Mail Outpatient Pharmacies (CMOP) effectively and efficiently 

accounted for non-controlled pharmaceutical inventories and to determine whether the 

CMOPs managed and safeguarded non-controlled pharmaceutical inventories at risk for 

diversion. CMOPs determine which pharmaceuticals are at risk for diversion by using 

professional judgment, past experience, and information from outside sources. The audit 

examined CMOP operations and controls at two of the seven VA CMOPs that provide 

pharmaceuticals to veterans nationwide. Work was conducted at the Charleston and 

Dallas CMOPs—both represented well-established CMOPs and Charleston’s operations 

received the second highest dollar value of CMOP pharmaceuticals purchased in 

FY 2008. 

The Charleston and Dallas CMOPs established physical security controls to prevent the 

unauthorized physical removal of pharmaceuticals from CMOPs. However, inventory 

management controls used to account for and prevent diversion of non-controlled 

pharmaceuticals could be further improved and inventory system access controls need 

strengthening. 

The Charleston and Dallas CMOPs did not perform a complete or consistent physical 

count of their entire pharmaceutical inventory as required by VHA inventory 

management criteria and guidelines. For example, at the Charleston CMOP, 

14 of the 18 pharmaceutical line items we reviewed had positive variances. The 

existence of these variances demonstrated the unreliability and inaccuracy of the CMOPs 

inventory records and positive variances can enable pilferage and diversion of 

pharmaceuticals to go undetected. 

The CMOP inventory management system provided by Quality Manufacturing Systems 

Incorporated (QMSI) did not always effectively track pharmaceutical dispensing. The 

CMOPs lacked policy and controls necessary to monitor and control pharmaceutical 

inventory adjustments. Adjustments were made without restricting the quantity of 

adjustments made, and an independent validation or verification of adjustments was not 

performed. 

In addition, the CMOPs did not comply with VA requirements for non-controlled 

pharmaceuticals held for return credit, and the potential exists for the credited amount to 

be significant. Finally, the CMOPs did not ensure adequate separation of duties over 

critical system functions and lacked adequate Econolink system access controls. The 

lack of compliance with inventory management criteria and controls put the CMOPs 

non-controlled pharmaceutical inventories at risk for diversion. Accountability for 

VA Office of Inspector General i 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

pharmaceutical inventories cannot be reasonably assured without strengthening inventory 

management and system access controls. 

In conclusion, physical inventories act as a check on the effectiveness of other inventory 

controls. Therefore, significant differences between what is computed as the ending 

inventory and what is actually available need to be independently reviewed and resolved 

before inventory records are adjusted. CMOPs did not always perform a complete 

physical count or consistently estimate their entire inventories, and QMSI software did 

not always accurately account for all pharmaceuticals dispensed. Therefore, CMOPs 

cannot accurately account for their inventory, calculate an accurate shrinkage rate, or an 

inventory turn rate. Inadequate CMOP inventory management controls place 

non-controlled pharmaceuticals in CMOP inventories at increased risk of theft and 

diversion. 

Background 

The primary mission of the VA CMOP program is to provide pharmaceuticals to 

VA Medical Center patients using automated order processing and delivery systems. 

Seven CMOPs support all 21 Veteran Integrated Service Networks (VISNs) by mailing 

pharmaceuticals to veteran patients throughout the United States. The seven VA CMOPS 

operate under the direction of VHA’s Pharmacy Benefits Management (PBM) Service. 

The national CMOP business office in Leavenworth, KS provides fiscal and logistics 

oversight and support to the CMOPs. 

CMOPs are a virtual extension of medical center pharmacies and assist VA facilities by 

providing seamless pharmaceutical delivery to patients. In FY 2008, the VA dispensed 

125.9 million prescriptions for VA patients, of which approximately 97.4 million 

(77 percent) were dispensed by the CMOPs. Furthermore, the CMOPs’ pharmaceutical 

purchases totaled approximately $2.3 billion. According to CMOP officials, 

approximately $2.26 billion (98 percent) was used for the purchase of non-controlled 

pharmaceuticals. 

CMOPs manage their pharmaceutical inventory with two different systems to order, 

receive, and dispense pharmaceuticals delivered to VA patients—the McKesson Prime 

Vendor System (Econolink) and QMSI. The prime vendor provides pharmaceuticals and 

medical supplies to regionally grouped military and federal customers, including VHA, 

from commercial distributors using a proprietary ordering system. QMSI is responsible 

for the software at five of the seven CMOPs and controls most of the production system 

while providing the majority of the user functionality. 

VA Office of Inspector General ii 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

CMOP Inventory Management and System Access Controls Need 

Strengthening to Ensure Accountability of Non-Controlled 

Pharmaceutical Inventories 

Improvements were needed to ensure adequate accountability of non-controlled 

pharmaceuticals in an effective and efficient manner. The Charleston and Dallas CMOPs 

established physical security controls to prevent the unauthorized physical removal of 

pharmaceuticals from CMOPs. However, the audit disclosed the Charleston and Dallas 

CMOPs were not complying with VHA inventory management criteria by not performing 

a complete and consistent physical count of their entire pharmaceutical inventory. Also, 

the QMSI software did not always adequately track the dispensing of pharmaceuticals. 

Furthermore, the CMOPs did not establish a policy for controlling and monitoring 

adjustments to pharmaceutical inventory, secure and account for non-controlled 

pharmaceuticals held for return credit, and segregate critical system functions or control 

and monitor Econolink system access. 

Our inventory analysis, interviews, observations, and evaluations of CMOP processes 

and facilities revealed two primary issues: (1) inadequate inventory management controls 

over non-controlled pharmaceuticals diminishes CMOP inventory accountability and 

(2) weak internal controls over system access to non-controlled pharmaceuticals 

increased the risk of diversion. 

Conclusion 

Access controls over specific non-controlled pharmaceuticals stored in the controlled 

substances vault and cage were adequate, and physical security controls were established 

to prevent the unauthorized physical removal of pharmaceuticals from CMOPs. 

However, the Charleston and Dallas CMOPs did not adequately account for their 

non-controlled pharmaceutical inventories in an effective and efficient manner. This 

impacted their ability to manage and safeguard their non-controlled pharmaceutical 

inventories. Inadequate CMOP inventory management controls, such as noncompliance 

with existing VA criteria and the lack of a policy for controlling and monitoring 

adjustments, and weak internal controls over system access to non-controlled 

pharmaceuticals increase VA’s risk of non-controlled pharmaceuticals being diverted and 

pilfered. As such, CMOPs need to establish inventory management controls and 

strengthen system access controls to help ensure adequate accountability over all 

non-controlled pharmaceutical inventories. 

Recommendations 

1. We recommend the Under Secretary for Health require the Deputy Chief Consultant 

PBM/CMOP to enforce the annual wall-to-wall physical inventory requirements. 

VA Office of Inspector General iii 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

2. We recommend the Under Secretary for Health require the Deputy Chief Consultant 

PBM/CMOP perform a complete inventory analysis to develop and implement a plan 

of action to mitigate significant variances. 

3. We recommend the Under Secretary for Health require the Deputy Chief Consultant 

PBM/CMOP develop policy and establish controls to monitor and control adjustments 

to pharmaceutical inventory records. 

4. We recommend the Under Secretary for Health require the Deputy Chief Consultant 

PBM/CMOP enforce policy compliance for returned and expired pharmaceuticals. 

5. We recommend the Under Secretary for Health require the Deputy Chief Consultant 

PBM/CMOP establish and implement procedures to prevent a single individual from 

ordering, receiving, and adjusting against the same pharmaceutical. 

6. We recommend the Under Secretary for Health disable all prime vendor generic user 

IDs and passwords and establish individual user IDs and passwords for ordering and 

receiving pharmaceuticals. 

Management Comments and OIG Response 

The Under Secretary for Health concurred with all our findings and recommendations. 

VHA instituted a plan for quarterly wall-to-wall physical inventories at each of the seven 

CMOPs and required each CMOP Director to certify they were in compliance with the 

policy for returned and expired pharmaceuticals. In addition, VHA agreed to develop a 

statement of work to rewrite the CMOP inventory management software to ensure 

complete and accurate tracking of inventory. 

Furthermore, VHA agreed to develop a national CMOP inventory management policy 

and establish a monthly review process of completed adjustments. VHA will also 

establish and enforce procedures that restrict a single individual from ordering, receiving, 

and adjusting against the same pharmaceutical. Finally, the Under Secretary for Health 

will ensure that all prime vendor generic user IDs and passwords for ordering and 

receiving pharmaceuticals are disabled, and the Deputy Chief Consultant PBM/CMOP 

will include, in the national CMOP inventory management policy, guidance and a 

requirement for an annual review. 

VA Office of Inspector General iv 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

VA Office of Inspector General v 

The Under Secretary for Health took appropriate actions to implement Recommendations 

1 and 4 so we consider these recommendations closed and planned corrective actions for 

Recommendations 2, 3, 5, and 6 are responsive to our concerns. Finally, we will close 

these recommendations when all proposed actions have been completed by VHA. 

Appendix B contains the full text of the Under Secretary’s comments. 

 (original signed by:) 

BELINDA J. FINN 

Assistant Inspector General 

for Auditing 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Introduction 

Purpose 

The Office of Inspector General (OIG) performed this audit to determine whether 

VA Consolidated Mail Outpatient Pharmacies (CMOPs) accounted for non-controlled 

pharmaceutical inventories in an effective and efficient manner and whether the CMOPs 

managed and safeguarded non-controlled pharmaceutical inventories at risk for diversion. 

Background 

In 1946, VA became the first organization in the United States to provide medications to 

patients by mail supporting individual VA medical centers. During the 1970s, VA began 

consolidating mail prescription workloads from multiple VA medical centers into 

centralized operations. In 1994, the CMOP located at Leavenworth, KS began 

processing high volume mail prescription workloads using an automated dispensing 

system. Since that time, VA expanded its CMOP program to include six additional 

facilities located in Charleston, SC; Chelmsford, MA; Dallas, TX; Hines, IL; 

Murfreesboro, TN; and Tucson, AZ. 

The mission of CMOPs is to provide high quality, timely, and cost-effective 

pharmaceuticals to our nation’s veterans. CMOPs are a virtual extension of medical 

center pharmacies and assist VA facilities by providing seamless pharmaceutical delivery 

to patients. Veterans’ pharmaceutical records are maintained at the medical center so that 

the provider/patient relationship is not interrupted. One of the benefits of CMOP 

automated pharmaceutical dispensing is that it enables pharmacy personnel at VA 

medical centers more time to interact and confer with patients seeking prescription 

counseling. 

For their initial prescription needs, patients are provided medications or supplies 

dispensed directly from VA medical facilities. VA medical facilities electronically 

transmit prescription information to CMOPs for a faster, more secure means of 

communicating a patient’s pharmaceutical needs and to provide facilities with operational 

flexibility in pharmaceutical deliveries. Prescription refills are generally dispensed by the 

CMOP responsible for servicing a particular VA medical facility. VA medical facilities 

nationwide transmit daily electronic refill requests to the CMOPs for dispensing and 

direct delivery to the patient. The CMOP completes the prescription process by returning 

an electronic record, thus verifying patient pharmaceuticals or medical supplies dispensed 

to the initiating VA medical facility. 

To ensure timely prescription deliveries when CMOPs experience production problems 

such as an emergency shutdown of the production system, prescriptions can be rerouted 

to another CMOP for processing. If problems or questions arise with the initial 

VA Office of Inspector General 1 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

prescription, the prescription data is returned to the transmitting facility for review and 

resolution. After all issues are resolved, the prescription is received by a CMOP, 

transferred to the most appropriate CMOP processing area, and then queued for 

dispensing. 

Once the prescription is dispensed, it is labeled by CMOP pharmacy technicians and 

pharmacy aides in conjunction with the CMOPs’ automated dispensing system, which 

uses barcode technology and radio frequency identification to ensure accurate 

prescription dispensing. After the prescription is dispensed and labeled, it is routed to a 

pharmacist for quality verification—examined to ensure the correct product, dose, rate, 

quantity, and strength was dispensed. Once the patient’s prescription is verified, the 

order is packaged and addressed for delivery. A completed prescription order is then 

consolidated with others for delivery to patients by the United States Postal Service or an 

overnight carrier. 

Pharmaceuticals dispensed by CMOPs are divided into two categories, controlled and 

non-controlled. Controlled pharmaceuticals are identified as such by the Drug 

Enforcement Agency (DEA) and are heavily safeguarded by the Veterans Health 

Administration (VHA). To reduce the risk of abuse and diversion, VHA requires that 

CMOPs store controlled pharmaceuticals in separate, secure storage vaults and conduct 

inventories every 72 hours. In contrast, most non-controlled pharmaceuticals (any 

pharmaceutical not categorized as controlled) are not subject to the same stringent 

inventory and oversight controls, even though non-controlled pharmaceuticals make up 

the bulk of the CMOPs’ inventories and account for the majority of CMOP 

pharmaceutical acquisitions. CMOPs subject some non-controlled pharmaceuticals at 

risk of diversion, such as erectile dysfunction and oral contraceptive pharmaceuticals, to 

the same treatment as controlled pharmaceuticals. In FY 2008, CMOPs’ pharmaceutical 

purchases totaled approximately $2.3 billion. According to CMOP officials, 

approximately $2.26 billion (98 percent) was used for the purchase of non-controlled 

pharmaceuticals. 

CMOPs manage their pharmaceutical inventory with two different systems to order, 

receive, and dispense pharmaceuticals delivered to VA patients—the McKesson Prime 

Vendor System (Econolink) and the inventory management system of QMSI. Econolink 

and QMSI descriptions follow: 

• Econolink Econolink is a client-server based system installed on personal 

computers and terminals at various medical facilities throughout VA. This 

application, provided and installed by McKesson, receives and provides 

pharmaceuticals and other medical supplies to all CMOPs. 

• QMSI QMSI software, referred to as the inventory management system by the 

Charleston and Dallas CMOPs, tracks the CMOPs automated and manual 

dispensing of pharmaceuticals. QMSI is used at five of the seven CMOPs 

VA Office of Inspector General 2 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

(including Charleston and Dallas) and controls the majority of the CMOP 

pharmaceutical production system. The remaining two CMOPs use the Systems 

Integration Baker software (S/I Baker) for inventory management, which is slated 

to be replaced by QMSI software. 

The process for ordering and receiving pharmaceuticals at all CMOPs follows: 

• The inventory management systems generate a daily automatic order file based on 

prescription demands and CMOP stock levels. 

• The automatic order file is reviewed, edited, and imported into Econolink, and 

orders are electronically transmitted to McKesson. 

• McKesson fills the orders and delivers the pharmaceuticals to CMOPs the next 

day. 

• Upon receipt of the pharmaceutical order, CMOP employees scan the bar coded 

pharmaceuticals into Econolink. 

• Econolink exports the scanned receiving data into the inventory management 

systems which updates CMOP inventory levels 

Scope and Methodology 

We reviewed and analyzed current policies, procedures, and internal controls for 

inventory management for five specific non-controlled pharmaceuticals at risk for 

diversion. (See Table 1 for the five pharmaceuticals we selected for review and the 

description of their therapeutic use.) At the Charleston and Dallas CMOPs, we evaluated 

the effectiveness of CMOPs’ physical security controls, conducted an inventory analysis, 

determined whether controls were established for monitoring and controlling adjustments 

to pharmaceutical inventory, and assessed CMOP inventory processes. As part of our 

assessment of the CMOP inventory processes, we evaluated the adequacy of CMOP 

separation of duties and Econolink system access controls. Our review focused on 

Charleston and Dallas CMOP pharmaceutical production and inventory operations from 

February through October 2008. 

CMOP Physical Security Controls. We interviewed Charleston and Dallas CMOP 

personnel to determine whether the CMOPs had established adequate physical security 

controls over non-controlled pharmaceutical inventories at risk for diversion. Physical 

security controls are established to prevent the unauthorized physical removal of 

pharmaceuticals from CMOPs. We validated the adequacy of physical security controls 

by observing and evaluating operations at both CMOPs, which included observing the 

controlled pharmaceuticals vault at the Charleston CMOP and the controlled 

pharmaceuticals cage at the Dallas CMOP. The controlled pharmaceuticals vault and 

VA Office of Inspector General 3 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

cage are where the CMOPs store the erectile dysfunction and oral contraceptive 

pharmaceuticals. Lastly, we reviewed the video surveillance system, at both CMOPs, 

including the observation of the receipt of pharmaceutical deliveries at one CMOP. 

Inventory Analysis. We selected five pharmaceuticals from a list of 46 non-controlled 

pharmaceuticals considered at risk for diversion that were identified during the Audit of 

VHA’s Management of Selected Non-Controlled Drugs. These 46 pharmaceuticals were 

considered to be at risk for diversion by experts in the private and public sector (VA OIG, 

the Federal Drug Administration, the Drug Enforcement Agency, the National 

Association of Drug Diversion Investigations, the National Association of Boards of 

Pharmacy, and Kaiser Permanente). 

Table 1. Description of the Five “At Risk” Pharmaceuticals 

Brand Name Generic Name Therapeutic Use 

Plavix Clopidogrel To treat mild heart attacks. 

Sustiva Efavirenz To treat Human Immunodeficiency 

Virus (HIV) Type I. 

Zyprexa Olanzapine To treat certain mental disorders. 

Ultram Tramadol To relieve moderately severe pain. 

Levitra Vardenafil To treat erectile dysfunction. 

To perform our inventory analysis and review of CMOP controls over non-controlled 

pharmaceuticals, we obtained the recorded beginning inventory balances, purchases, and 

dispensed pharmaceutical data and their related product codes from the Charleston and 

Dallas CMOPs for the five pharmaceuticals identified in Table 1. A product code is an 

identifier specific to a product, a product’s strength, and a CMOP. The five 

pharmaceuticals consisted of 18 product codes at the Charleston CMOP and 17 product 

codes at the Dallas CMOP. We performed one inventory analysis at the Charleston 

CMOP in September 2008 and two inventory analyses—one in August and the other in 

October 2008 at the Dallas CMOP. We performed the second inventory analysis at 

Dallas to determine whether significant variances existed after we obtained an accurate 

beginning inventory balance from our initial independent physical count conducted in 

August. We did not conduct a second inventory analysis at the Charleston CMOP 

because additional testing was considered unnecessary. 

VA Office of Inspector General 4 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

We conducted our analysis to determine if the Charleston and Dallas CMOPs were 

accurately accounting for their non-controlled pharmaceutical inventories and QMSI 

software was adequately tracking dispensed pharmaceuticals. We compared the OIG 

computed ending inventory (the CMOP provided beginning inventory plus McKesson 

provided purchases less dispensed pharmaceuticals identified by QMSI) for the five 

selected pharmaceuticals to the physical inventory that was on hand based on our 

physical count. We performed the calculations below as part of our analysis, which 

resulted in negative and positive variances. Variances occur when the CMOPs’ actual 

ending inventory is lower or higher than what the OIG computed as ending inventory 

given the number of pills ordered and then dispensed. (See Appendix A for the results of 

our inventory analysis): 

• OIG Computed Ending Inventory = Beginning Inventory + Purchases – Dispensing 

• Pill Count Difference = Physical Count – OIG Computed Ending Inventory 

• Percent Variance = Pill Count Difference ÷ OIG Computed Ending Inventory 

We obtained beginning inventory data from the CMOPs, purchase data from the prime 

vendor (McKesson), and dispensing data from the QMSI software. We were unable to 

validate the beginning inventory for each of the pharmaceuticals analyzed because the 

beginning inventory was the product of continuous adjustments made against the system 

balance. We were also unable to validate the McKesson purchase data because neither 

McKesson nor the QMSI software retains purchase order records thus preventing a 

comparison of purchase orders to receiving documentation. Finally, we could not 

validate dispensing data because working with actual dispensing data would disrupt 

CMOP production and subsequently impact the timely delivery of pharmaceuticals to 

patients. 

Pharmaceutical Inventory Adjustments. To determine whether the CMOPs established 

controls for monitoring and controlling adjustments to pharmaceutical inventory, we 

interviewed Charleston and Dallas CMOP personnel to: (1) obtain the list of all 

individuals authorized to adjust pharmaceutical inventory; (2) determine if CMOP staff 

document the adjustment reason; and (3) determine whether management adequately 

monitors and tracks adjustments. We also observed the process used at the CMOPs to 

make adjustments to pharmaceutical inventory balances. 

CMOP Inventory Processes. To determine the processes used to manage non-controlled 

pharmaceuticals at risk for diversion we: (1) interviewed Charleston and Dallas CMOP 

personnel; (2) identified and evaluated the policies and procedures on the management of 

pharmaceutical inventories; and (3) observed and evaluated the manner by which the 

CMOPs purchase, receive, adjust, store, dispense, mail, secure, and monitor returned 

pharmaceuticals. 

VA Office of Inspector General 5 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Separation of Duties. As part of our assessment of the CMOP inventory processes and at 

the request of the National Director of CMOP Operations, we determined the adequacy of 

separation of duties by obtaining the list of employees/users that have access to CMOP 

pharmacy data systems and interviewing Charleston and Dallas CMOP personnel to 

determine whether management at either CMOP monitors or tracks user access 

permissions. Lastly, we analyzed the list to determine the adequacy of the number of 

employees/users who had authorization to purchase, receive, and adjust pharmaceutical 

inventories. 

System Access Controls. As part of our assessment of the CMOP inventory processes, 

we observed the Econolink ordering process at both CMOPs and conducted interviews 

with Charleston and Dallas CMOP personnel. We did not expand testing of the 

Econolink system access controls to all facilities throughout VA because our audit 

objectives focused on CMOPs’ inventory management. In addition, we did not review 

the system access controls over the SI/Baker software because this system is not used at 

the Charleston and Dallas CMOPs. 

Use of Computer-Processed Data. We performed a limited assessment of the reliability 

of the purchase data obtained from McKesson and the dispensing data obtained from 

QMSI. Our assessment was limited because McKesson and QMSI do not retain purchase 

order records which did not allow us to compare purchase orders against what was 

received. Additionally, a validation of dispensing data would have required a disruption 

of CMOP production and impacted the CMOPs’ ability to provide timely delivery of 

pharmaceuticals to patients. Therefore, we conducted a physical count and inventory 

analysis of five pharmaceuticals at risk for diversion and their associated product codes. 

Specifically, we compared what was on hand to what the OIG computed as ending 

inventory based on the CMOPs’ beginning inventory plus purchases less dispensed 

pharmaceuticals. Since our analysis revealed significant variances between our physical 

count and what we computed as ending inventory, we concluded that we could not rely 

upon data obtained from either McKesson’s Econolink or QMSI. We have included the 

results of our analysis as part of a finding within this report. 

We conducted our audit from July 2008 through March 2009 in accordance with 

generally accepted government auditing standards. The standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

VA Office of Inspector General 6 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Results and Conclusions 

The Charleston and Dallas CMOPs established physical controls to prevent the 

unauthorized physical removal of pharmaceuticals from CMOPs. However, inventory 

management controls used to account for and prevent diversion of non-controlled 

pharmaceuticals could be further improved. For example, at the Charleston CMOP, 14 of 

the 18 pharmaceutical line items we reviewed had positive variances. The existence of 

these variances demonstrated the unreliability and inaccuracy of the CMOPs inventory 

records. Furthermore, the existence of positive variances can enable pilferage and 

diversion of pharmaceuticals to go undetected. 

Our analysis of CMOP inventories, interviews with CMOP officials, and observations 

and evaluations of CMOP processes revealed that CMOP inventory management controls 

for non-controlled pharmaceuticals were inadequate and inventory system access controls 

needed strengthening. Specifically, we found: 

• Inadequate annual wall-to-wall physical inventories of their entire non-controlled 

pharmaceuticals, as required by VHA. 

• Inadequate tracking of dispensed pharmaceuticals by QMSI. 

• Significant variances between the OIG computed ending inventory and the 

pharmaceuticals that CMOPs had on hand. 

• Inadequate controls to monitor and control pharmaceutical inventory adjustments 

and a lack of policy guidance. 

• Lack of controls for non-controlled pharmaceuticals held for return credit as 

required. 

• Inadequate separation of duties over critical system functions. 

• Inadequate Econolink system access controls. 

As a result, the CMOPs pharmaceutical inventory records did not accurately reflect the 

pharmaceuticals on hand, thus impacting CMOPs ability to accurately compute and 

report VA’s CMOP shrinkage rate or inventory turn rate. A shrinkage rate is used to 

determine CMOPs missing pharmaceutical inventory, while the inventory turn rate is the 

primary measure of the effectiveness of inventory management. In addition, because 

CMOPs have not ensured accurate and complete inventory control over non-controlled 

pharmaceuticals, they have potentially increased VA’s risk of pilferage and diversion of 

non-controlled pharmaceuticals. 

VA Office of Inspector General 7 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

Inadequate Inventory Management Controls of Non-Controlled 

Pharmaceuticals Diminishes CMOP Inventory Accountability 

The Charleston and Dallas CMOPs did not perform complete and consistent annual 

physical wall-to-wall inventories for all items, as required, and the QMSI software does 

not always adequately track pharmaceutical dispensing. Additionally, both CMOPs did 

not establish a policy for controlling and monitoring adjustments to pharmaceutical 

inventory or secure and account for non-controlled pharmaceuticals held for return credit, 

as required. VHA criteria and guidelines exist to ensure CMOPs perform annual 

wall-to-wall inventories (complete physical counts and/or estimations of open bottle 

inventory balances) and to manage pharmaceutical return credits. CMOPs need to 

establish criteria to monitor and control pharmaceutical adjustments. 

CMOPs Did Not Conduct Required Non-Controlled Pharmaceutical Inventories. 

The Charleston and Dallas CMOPs did not always conduct complete physical counts or 

consistently estimate inventory quantities of open products during their annual 

wall-to-wall physical inventory. Also, because of the various shapes and sizes of pills 

being dispensed by the individual pill dispenser (IPD), QMSI, which controls the 

majority of the CMOPs production system, does not always adequately track the 

dispensing of pharmaceuticals. 

Physical Counts of CMOP Pharmaceutical Inventory. The Charleston and Dallas 

CMOPs did not perform an annual wall-to-wall physical inventory, as required, for all 

items and inconsistently estimated their inventory quantities of open products. VHA 

Handbook 1761.2, VHA Inventory Management, March 19, 2003, requires that an annual 

wall-to-wall physical inventory be performed for all items. In addition, VHA’s 

Pharmacy Inventory Guidelines states that inventory quantities of an open product need 

to be estimated to the nearest tenth of a bottle. The guidelines further state that 

inventories can be useful in making accurate projections and determining shrinkage and 

inventory turn rates. For example, CMOP pharmaceuticals are dispensed by either 

manual or automated means, including the IPD-an apparatus for dispensing individual 

dosage units of medication such as tablets or capsules into containers. Charleston and 

Dallas CMOP personnel informed us they physically count all pharmaceuticals that are 

manually dispensed, but they do not physically count all pharmaceuticals dispensed from 

IPD because it is too labor intensive. Charleston, which maintains an inventory of 

303 IPDs, counts the top 20 (7 percent) of their high-dollar value IPD dispensed 

pharmaceuticals and estimates the remaining 283 IPDs to the nearest fourth. Charleston 

estimates their open product inventory quantities to the nearest fourth of a bottle. Dallas 

does not estimate the quantities in their IPDs but does estimate their open product 

inventory quantities to the nearest half bottle. As previously mentioned, VHA criteria for 

annual wall-to-wall physical inventory requires estimates of open product inventory 

quantities to the nearest tenth of a bottle. 

VA Office of Inspector General 8 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

For CMOPs to provide and ensure a more accurate calculation of their shrinkage rate, 

inventory turn rate, and ensure accountability over non-controlled pharmaceuticals, they 

need to perform a complete annual wall-to-wall physical inventory and estimate 

inventory quantities for open products, as required. 

QMSI Software Tracking Dispensed Pharmaceuticals. QMSI software does not always 

adequately track the dispensing of pharmaceuticals. We performed an inventory analysis 

at the Charleston CMOP, and at the Dallas CMOP, we performed two inventory 

analyses—one in August and the other in October 2008. We only performed the second 

inventory analysis at Dallas to determine whether significant variances existed after we 

obtained an accurate beginning inventory balance from our initial independent physical 

count conducted in August (ending inventory amount). We did not conduct two 

inventory analyses at the Charleston CMOP because additional testing was considered 

unnecessary. 

The Dallas inventory analysis performed in August consisted of the five selected 

pharmaceuticals and 17 product codes; while the Dallas inventory analysis performed in 

October was limited to two pharmaceuticals and five product codes. These 

pharmaceuticals were selected based on the following criteria: 

• Pharmaceuticals that had a significant (100 percent or higher) positive variance 

based on the results of our inventory analysis in August. 

• All pharmaceuticals that had a negative variance based on the results of our 

inventory analysis in August. 

• A pharmaceutical with a variance that had been moved from IPD dispensing to 

manual dispensing as a result of our inventory analysis in August. 

(Vardenafil 5mg was dispensed from an IPD and had a negative five percent 

variance based on the inventory analysis conducted in August. As a result, CMOP 

staff immediately moved this pharmaceutical from IPD dispensing to manual 

dispensing. We wanted to determine whether the variance improved as a result of 

this change.) 

Based on our inventory analyses for the time period February 2008 through October 

2008, we identified pill variances ranging from -3,092 pills to 192,498 pills valued at an 

approximate total cost of $1.1 million. The existence of these variances demonstrated the 

unreliability and inaccuracy of the CMOPs’ inventory records and positive variances can 

enable pilferage and diversion of pharmaceuticals to go undetected. 

A summary of the CMOP inventory analysis conducted at both CMOPs follows: 

VA Office of Inspector General 9 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

• Charleston’s pill count compared to the OIG computed ending inventory varied 

from -1,762 pills to 192,498 pills valued at approximately $997,000 for the five 

selected pharmaceuticals and 18 product codes. 

• In August, Dallas’s pill count compared to the OIG computed ending inventory 

varied from -3,092 pills to 39,017 pills valued at approximately $86,000 for the 

five selected pharmaceuticals and 17 product codes. 

• In October, Dallas’s pill count compared to the OIG computed ending inventory 

varied from -403 pills to 93 pills valued at approximately $-410 for two 

pharmaceuticals and five product codes. 

(See Appendix A for the detailed results of the CMOP inventory analysis.) 

CMOP personnel could not explain the positive and negative pill variances between the 

actual pill count and the amounts the OIG computed as ending inventory. However, they 

indicated that the variances may be the result of QMSI software inaccurately tracking 

dispensed pills and because an annual wall-to-wall physical inventory was not completed 

for all pharmaceuticals, which could lead to an inaccurate beginning inventory number. 

In addition, according to CMOP personnel, some pharmaceuticals do not accurately 

dispense from the IPD due to the various shapes and sizes of the capsules, which impact 

QMSI’s ability to track what has been dispensed accurately. For example, as previously 

mentioned, our initial inventory analysis of Vardenafil (5mg) identified a negative five 

percent variance when dispensed from IPD. This pharmaceutical was moved from IPD to 

manual dispensing and our subsequent October inventory analysis identified a positive 

two percent variance for Vardenafil (5mg), potentially indicating that the significant 

variance change within three months was due to the pharmaceutical being moved from 

IPD to manual dispensing or because we had obtained an accurate ending inventory 

count. 

Finally, we obtained a QMSI generated “Dispense Activity Report,” which provides the 

amount of pills dispensed for a selected pharmaceutical for Tramadol on August 19 and 

August 22 covering the time period August 8-18, 2008, and found that QMSI reported a 

different total amount dispensed for each of the days for which we obtained the reports. 

For example, on August 19, the report showed approximately 484,000 pills were 

dispensed; however, on August 22, the report showed approximately 488,000 pills were 

dispensed for the same period. Therefore, based on our inventory analyses we concluded 

that ending inventory reported to be on hand by the QMSI software may not always 

accurately reflect the actual remaining inventory balance. 

In conclusion, physical inventories act as a check on the effectiveness of other inventory 

controls. Therefore, attempts must be made to determine the causes of significant 

differences between what is computed as the ending inventory and what is actually 

VA Office of Inspector General 10 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

available. CMOPs did not always perform a complete physical count or consistently 

estimate their entire inventories, and QMSI software did not always accurately account 

for all pharmaceuticals dispensed from IPD. Therefore, CMOPs cannot accurately 

account for their inventory, calculate an accurate shrinkage rate or inventory turn rate, 

and ensure that non-controlled pharmaceuticals are not being diverted and pilfered. 

CMOP Management Needs to Establish a Policy for Controlling and Monitoring 

Adjustments to Pharmaceutical Inventory. Charleston and Dallas CMOP management 

did not effectively control and monitor adjustments made to their pharmaceutical 

inventory. This occurred because a CMOP specific policy for controlling and monitoring 

pharmaceutical adjustments does not exist. For example, when the CMOPs conduct a 

physical count for a particular pharmaceutical and a variance exists between the physical 

count and the system balance, an adjustment is made to the QMSI system balance for that 

pharmaceutical. Adjustments are made to reduce or enhance the QMSI system balance 

so it corresponds to the physical count. There are no restrictions to the number of 

adjustments an individual can make to pharmaceuticals and there are no limits to the 

adjustment quantities made against pharmaceuticals. Finally, CMOP management does 

not independently validate and verify adjustments made to pharmaceutical inventory 

balances. 

Further, at the Charleston CMOP, we found that the adjustment reason codes are not 

available in QMSI to allow CMOP personnel to document the reason(s) an adjustment is 

made to a pharmaceutical inventory item. However, the Charleston CMOP implemented 

a verbal policy requesting staff to document in hard copy the reason adjustments were 

made to inventory. The Charleston CMOP also presented a proposal to QMSI requesting 

a modification to the production system that would add a field allowing for a mandatory 

selection of an adjustment reason. Finally, although the Dallas QMSI maintains an 

adjustment reason field so that personnel can document inventory adjustments, the Dallas 

CMOP management was not trending adjustments to determine reasons adjustments were 

made. 

A lack of policy to control and monitor adjustments to pharmaceutical inventory could 

lead to inaccurate inventory records and the CMOPs inability to accurately account for 

their pharmaceutical inventory. Furthermore, without controls over adjustments, theft 

and diversion of drugs can go undetected. Significant inventory adjustments should only 

be made after supervisory review and authorization. 

Security and Accountability Over Non-Controlled Pharmaceuticals Held for Return 

Credit Needs Improvement. CMOPs did not always secure, track, and monitor 

non-controlled pharmaceuticals held for return credit. Specifically, Charleston and 

Dallas CMOPs did not always: 

VA Office of Inspector General 11 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

• Secure non-controlled pharmaceuticals held for return in a location away from the 

normal inventory. 

• Maintain a detailed list of non-controlled pharmaceuticals held for return. 

• Reconcile credits received to the list of non-controlled pharmaceuticals returned. 

VHA Directive 2008-021, Monitoring of Non-Controlled Substance Medication Returns, 

April 17, 2008, states non-controlled substance medications held for return credit must be 

secured, tracked, and monitored to reduce the possibility of fraud and maximize revenues 

received through credits. Although the CMOPs were aware of the requirements, they had 

not initiated procedures to ensure compliance with VHA requirements. 

At the Charleston CMOP, we found that the Returned Non-Schedule Drug Report

showed anticipated return values due from vendors that ranged from $436 to $147,000 

for the 12-month period ending September 2, 2008. During the same period, however, 

the highest amount credited to the CMOP was only $22,000. For example, the CMOP 

might receive a check from the vendor for a credit amount. Since the CMOP would not 

know for which month the credit applied, because they do not maintain sufficient 

information about the returned items to reconcile refunds against returns, reconciliation to 

the vendor Returned Non-Schedule Drug Report would not be possible and the potential 

exists for the refund amount to be significant. Consequently, CMOPs cannot adequately 

determine if credits received from the vendor were accurately applied to the returned 

items. 

In conclusion, inadequate CMOP inventory management controls place all non-controlled 

pharmaceuticals at risk of being diverted and pilfered. Additionally, the lack of CMOP 

inventory management controls impacts the CMOPs’ ability to accurately manage and 

safeguard their non-controlled pharmaceutical inventories; calculate an accurate 

shrinkage rate or inventory turn rate; and adequately determine if credits received from 

the vendor were sufficient. Therefore, establishing controls to ensure CMOP compliance 

with existing VHA criteria and developing and implementing a policy for controlling and 

monitoring adjustments will help ensure adequate accountability over the CMOPs’ 

non-controlled pharmaceutical inventories. 

Weak Internal Controls for System Access to Non-Controlled 

Pharmaceuticals Increase Risk of Diversion 

The Charleston and Dallas CMOPs did not ensure segregation of critical system functions 

and did not control and monitor Econolink system access. However, VA provides 

guidance to ensure that adequate separation of duties exists for critical system functions. 

Critical System Functions Need to Be Segregated. CMOPs did not always ensure 

adequate separation of duties for users who have Econolink access to order and receive 

VA Office of Inspector General 12 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

and QMSI access to order, receive, and adjust pharmaceutical inventories. The VA Cyber 

Security Practitioner Reference Guide Version 2.0, March 30, 2006, defines separation of 

duties as the practice of dividing the steps of a critical function among different 

individuals. We identified 33 users at the Charleston CMOP and 28 users at the Dallas 

CMOP whose combined Econolink and QMSI access allowed them to order, receive, and 

adjust non-controlled pharmaceutical inventories. In addition, we found that QMSI does 

not track system user activity to determine if an employee has used all three permissions, 

which allowed users to order, receive, and adjust against the same pharmaceutical. 

This occurred because CMOP management does not monitor or track permissions 

granted to employees. For example, an employee may be granted multiple permissions to 

perform their job requirements or to back up another employee who is on leave. 

Generally, employees with multiple permissions would not pose a separation of duties 

problem if QMSI was configured to restrict an employee with multiple permissions from 

ordering, receiving, and adjusting against a single pharmaceutical; however, QMSI does 

not maintain the automated controls necessary to restrict an employee from using their 

three permissions against the same pharmaceutical. 

To determine the extent to which users with all three permissions were ordering, 

receiving, and adjusting against the same pharmaceutical, we attempted to obtain user 

activity for those with multiple system permissions. We discovered that QMSI did not 

have the capability to identify this type of user activity. Therefore, employees with 

multiple permissions leave the CMOPs vulnerable to pilferage by maintaining the 

capability to potentially order, receive, and adjust against a single pharmaceutical given 

that such user activity, if occurring, is not tracked by the CMOPs. A lack of adequate 

separation of duties and monitoring of user activity and permissions impacts the CMOPs 

ability to ensure the accuracy, reliability, and completeness of pharmaceutical inventories 

and ultimately, their ability to compute realistic shrinkage rates and inventory turn rates. 

As a result of our review, the Charleston and Dallas CMOPs took action to delete some 

user permissions to reduce vulnerabilities that result from inadequate separation of duties. 

CMOP Management Needs to Ensure Access Controls to the Prime Vendor System 

Exist. CMOPs did not control access to Econolink, the McKesson Prime Vendor 

System. Econolink is configured to allow CMOP personnel to use generic identifications 

(ID) and passwords. Econolink was installed at the Charleston and Dallas CMOPs in 

2004 with generic IDs and passwords to provide users with the capability to order and 

receive pharmaceuticals before they had received their individual IDs and passwords. 

With the generic Econolink ID and password, CMOPs are at risk for anonymously 

ordered pharmaceuticals to be adjusted in QMSI and pilfered by employees. For 

example, an employee can transmit and receive a pharmaceutical ordered in Econolink 

without being identified as a specific user. The same employee can then use their unique 

ID and password to adjust QMSI by reducing the inventory balance for the same 

pharmaceutical and keep or divert the pharmaceutical for personal use. VA Handbook 

VA Office of Inspector General 13 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

6500, Information Security Program, September 18, 2007, states that VA controls must 

uniquely identify system users, and each user ID will be associated with a unique 

password to authenticate the individual. When identification and authentication are used 

together, they provide an effective means to identify and validate a user’s identity prior to 

granting system access. 

At our request, we observed a Dallas CMOP employee successfully transmit a 

pharmaceutical order using the generic ID and password. The same employee also has 

permissions to receive and adjust pharmaceutical inventories. We also requested activity 

data that took place under the generic ID to evaluate the magnitude of its use; however, 

the CMOPs do not track user activity associated with the generic IDs and passwords. 

Further, the CMOP management does not review user adjustments in QMSI, as 

previously mentioned as a finding in this report. 

The CMOPs’ inability to control access to McKesson’s Econolink application poses 

significant system vulnerability and increases the potential for diversion or pilferage of 

CMOP pharmaceuticals. As a result of our review, the CMOPs took action to disable the 

Econolink generic ID and password accounts and assigned specific user IDs at the 

Charleston and Dallas CMOPs. 

In conclusion, inadequate separation of duties over critical system functions and 

inadequate Econolink system access controls leave the CMOPs vulnerable to 

non-controlled pharmaceuticals being pilfered and diverted. Weak system access 

controls impact the CMOPs’ ability to adequately manage and safeguard pharmaceutical 

inventories and compute realistic shrinkage rates and inventory turn rates. 

Other Matters Reported 

Inadequate Access Controls to the Prime Vendor System Could Exist at Pharmacies 

Throughout the VA. McKesson, VHA’s prime vendor, provides pharmaceuticals and 

other medical supplies to pharmacies throughout VA. Prior to the pharmacies 

transitioning to the web-based Supply Management Online Database (SMO), VA medical 

facilities were using Econolink to order and receive pharmaceuticals. As previously 

reported, Econolink is configured to allow the use of generic IDs and passwords. During 

our audit, we learned that at facilities where Econolink is installed, users may still be able 

to transmit and receive pharmaceutical orders using generic IDs and passwords. As a 

result of our review, the Chief Consultant, Pharmacy Benefits Management, issued a 

memorandum to all VA facilities requiring them to disable all active generic IDs and 

password accounts. However, we do not have absolute assurance that all active 

Econolink accounts that may exist at facilities throughout the VA have been disabled. 

We also attempted to determine whether Econolink is currently installed and active and 

the magnitude by which pharmaceuticals are ordered and received using the generic ID 

and password at pharmacies throughout VA. We asked McKesson to provide a list of 

VA Office of Inspector General 14 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

user activity, which took place under the generic ID and password VA-wide. McKesson 

does not maintain the capability to track orders by user. Based on our request, McKesson 

did provide a listing that identified 371 active Econolink accounts throughout VA. We 

were later informed that the provided list did not reflect active Econolink accounts. 

McKesson agreed to provide documentation to support their statement that the originally 

identified 371 active Econolink accounts were not active throughout VA, but this 

documentation was never provided. In conclusion, active Econolink accounts could exist 

throughout the VA, allowing users to order and receive pharmaceuticals using a generic 

ID and password. 

Conclusion 

Access controls over specific non-controlled pharmaceuticals stored in the controlled 

substances vault and cage were adequate, and physical security controls were established 

to prevent the unauthorized physical removal of pharmaceuticals from CMOPs. 

However, the Charleston and Dallas CMOPs did not adequately account for their 

non-controlled pharmaceutical inventories in an effective and efficient manner. This 

impacted their ability to manage and safeguard their non-controlled pharmaceutical 

inventories at risk for diversion. Inadequate CMOP inventory management controls, 

such as noncompliance with existing VA criteria and the lack of a policy for controlling 

and monitoring adjustments, and weak internal controls over system access to 

non-controlled pharmaceuticals potentially increase VA’s risk of non-controlled 

pharmaceuticals being diverted and pilfered. As such, CMOPs need to establish 

inventory management controls and strengthen system access controls to help ensure 

adequate accountability over all non-controlled pharmaceutical inventories. 

Recommendations 

1. We recommend the Under Secretary for Health require the Deputy Chief 

Consultant PBM/CMOP enforce the annual wall-to-wall physical inventory 

requirement. 

2. We recommend the Under Secretary for Health require the Deputy Chief 

Consultant PBM/CMOP perform a complete inventory analysis to develop and 

implement a plan of action to mitigate significant variances. 

3. We recommend the Under Secretary for Health require the Deputy Chief 

Consultant PBM/CMOP develop policy and establish controls to monitor and 

control adjustments to pharmaceutical inventory records. 

4. We recommend the Under Secretary for Health require the Deputy Chief 

Consultant PBM/CMOP enforce compliance with the policy for returned and 

expired pharmaceuticals. 

VA Office of Inspector General 15 
Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability 

VA Office of Inspector General 16 

5. We recommend the Under Secretary for Health require the Deputy Chief 

Consultant PBM/CMOP establish and enforce procedures that restrict a single 

individual from ordering, receiving, and adjusting against the same 

pharmaceutical. 

6. We recommend the Under Secretary for Health disable all prime vendor generic 

user IDs and passwords and establish individual user IDs and passwords for 

ordering and receiving. 

Management Comments and OIG Response 

The Under Secretary for Health concurred with all our findings and recommendations. 

VHA instituted a plan for quarterly wall-to-wall physical inventories at each of the seven 

CMOPs and required each CMOP Director to certify they were in compliance with the 

policy for returned and expired pharmaceuticals. In addition, VHA agreed to develop a 

statement of work to rewrite the CMOP inventory management software to ensure 

complete and accurate tracking of inventory. 

Furthermore, VHA agreed to develop a national CMOP inventory management policy 

and establish a monthly review process of completed adjustments. VHA will also 

establish and enforce procedures that restrict a single individual from ordering, receiving, 

and adjusting against the same pharmaceutical. Finally, the Under Secretary for Health 

will ensure that all prime vendor generic user IDs and passwords for ordering and 

receiving pharmaceuticals are disabled, and the Deputy Chief Consultant PBM/CMOP 

will include, in the national CMOP inventory management policy, guidance and a 

requirement for an annual review. 

The Under Secretary for Health took appropriate actions to implement Recommendations 

1 and 4 so we consider these recommendations closed and planned corrective actions for 

Recommendations 2, 3, 5, and 6 are responsive to our concerns. Finally, we will close 

these recommendations when all proposed actions have been completed by VHA. 

Appendix B contains the full text of the Under Secretary’s comments. 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix A 

VA Office of Inspector General 17 

CMOP Inventory Analysis Results 

Table 1. Charleston CMOP Inventory Analysis Results September 2008 

Physical Pill 

Count1 

OIG Computed 

Ending 

Inventory2 

Pill Count 

Difference 

(Variance)3 

Inventory 

Value of Pill 

Count 

Difference4 

Percent 

Variance5 

Olanzapine 20 mg 49,975 49,602 373 $5,020 1%

Olanzapine 15 mg 42,557 40,180 2,377 $24,498 6%

Olanzapine 10 mg 13,548 5,671 7,877 $54,490 139%

Olanzapine 7.5 mg 2,550 1,490 1,060 $5,920 71%

Olanzapine 5 mg 7,233 -5,956 13,189 $59,445 -221%

Olanzapine 2.5 mg 1,288 3,050 -1,762 -$6,735 -58%

Rapid 20 mg 210 -30 240 $3,324 -800%

Rapid 15 mg 390 330 60 $623 18%

Rapid 10 mg 480 -90 570 $3,943 -633%

Rapid 5 mg 540 480 60 $276 13%

Vardenafil 20 mg 127,477 73,304 54,173 $133,211 74%

Vardenafil 10 mg 30,408 27,773 2,635 $6,479 9%

Vardenafil 5 mg 330 294 36 $89 12%

Vardenafil 2.5 mg 290 15 275 $676 1833%

Clopidogrel Clopidogrel 75 mg 485,096 298,853 186,243 $508,754 62%

Tramadol Tramadol 50 mg 718,727 526,229 192,498 $4,391 37%

Efavirenz 200 mg 47,790 3,855 43,935 $139,142 1140%

Efavirenz 600 mg 9,600 3,887 5,713 $53,609 147%

Total $997,156 1

The physical pill count was performed to determine the amount of pills the CMOPs had on hand.

2

Computed using CMOP provided beginning inventory plus purchases less dispensed pharmaceuticals. 3

Pill count difference is the difference between the physical pill count and the OIG computed ending inventory. 4

Inventory value was computed by multiplying the cost per pill by the pill count difference. 5

Percent variance was computed by dividing the pill count difference into the OIG computed ending inventory.

Efavirenz 

Olanzapine/

Zyprexa

Vardenafil/ 

Levitra 

 Generic/Brand Name 

and Strength
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix A 

VA Office of Inspector General 18 

Table 2. Dallas CMOP Inventory Analysis Results August 2008 

Physical Pill 

Count1 

OIG Computed 

Ending 

Inventory2 

Pill Count 

Difference

(variance)3 

Inventory 

Value of Pill 

Count 

Difference4 

Percent 

Variance5 

Olanzapine 20 mg 3,766 1,786 1,980 $27,423 111%

Olanzapine 15 mg 3,655 2,769 886 $9,131 32%

Olanzapine 10 mg 5,334 4,200 1,134 $7,689 27%

Olanzapine 7.5 mg 1,149 1,127 22 $123 2%

Olanzapine 5 mg 1,591 4,683 -3,092 -$13,936 -66%

Olanzapine 2.5 mg 1,891 1,867 24 $93 1%

Rapid 20 mg 0 0 0 $0 0%

Rapid 15 mg 30 0 30 $312 0%

Rapid 10 mg 360 360 0 $0 0%

Rapid 5 mg 30 54 -24 -$110 -44%

Vardenafil 20 mg 37,192 34,282 2,910 $7,156 8%

Vardenafil 10 mg 1,051 40 1,011 $2,486 2528%

Vardenafil 5 mg 298 314 -16 -$39 -5%

Vardenafil6 2.5 mg N/A N/A N/A $0 N/A

Clopidogrel Clopidogrel 75 mg 72,319 56,086 16,233 $44,343 29%

Tramadol Tramadol 50 mg 1,056,970 1,017,953 39,017 $890 4%

Efavirenz 200 mg 266 266 0 $0 0%

Efavirenz 600 mg 1,050 990 60 $563 6%

Total $86,124 1

The physical pill count was performed to determine the amount of pills the CMOPs actually had on hand. 2 Computed using CMOP provided beginning inventory plus purchases less dispensed pharmaceuticals. 3

Pill count difference is the difference between the physical pill count and the OIG computed ending inventory. 4

Inventory value was computed by multiplying the cost per pill by the pill count difference.

5

Percent variance was computed by dividing the pill count difference into the OIG computed ending inventory. 6

The Dallas CMOP did not carry Vardenafil in the 2.5 mg dosage.

Vardenafil/ 

Levitra

Efavirenz

Olanzapine/

Zyprexa

 Generic/Brand Name 

and Strength
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix A 

VA Office of Inspector General 19 

Table 3. Dallas CMOP Inventory Analysis Results October 2008 

Physical Pill 

Count1 

OIG Computed 

Ending 

Inventory2 

Pill Count 

Difference

(variance)3 

Inventory 

Value of Pill 

Count 

Difference4 

Percent 

Variance5 

Olanzapine 20 mg 2,622 2,529 93 $1,288 4%

Olanzapine 5 mg 618 1,021 -403 -$1,816 -39%

Olanzapine 

Rapid 5 mg 180 150 30 $138 20%

Vardenafil 10 mg 3,373 3,385 -12 -$30 0%

Vardenafil 5 mg 224 220 4 $10 2%

Total -$410 1

The physical count was performed to determine the amount of pills the CMOPs actually had on hand.

2

Computed using CMOP provided beginning inventory plus purchases less dispensed pharmaceuticals.

3

Pill count difference is the difference between the physical pill count and the OIG computed ending inventory. 4

Inventory value was computed by multiplying the cost per pill by the pill count difference.

5

Percent variance was computed by dividing the pill count difference into the OIG computed ending inventory.

Vardenafil

Olanzapine/

Zyprexa

 Generic/Brand Name 

and Strength
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix B 

Under Secretary for Health Comments 

VA Office of Inspector General 20 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix B 

VA Office of Inspector General 21 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix B 

VA Office of Inspector General 22 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix B 

VA Office of Inspector General 23 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix B 

VA Office of Inspector General 24 
 Audit of VA Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix C 

OIG Contact and Staff Acknowledgments 

OIG Contact Mario Carbone (214) 253-3301 

Acknowledgments Theresa Cinciripini 

Clenes Duhon 

Glen Gowans 

John Houston 

Michael Jacobs 

Heather Jones 

Kristin Nichols 

Chau Pham 

Sally Stevens 

VA Office of Inspector General 25 
 Audit of FY 2008 Consolidated Mail Outpatient Pharmacy Inventory Accountability

Appendix D 

Report Distribution 

VA Distribution

Office of the Secretary 

Veterans Health Administration 

Veterans Benefits Administration 

National Cemetery Administration 

Assistant Secretaries 

Office of General Counsel 

Non-VA Distribution

House Committee on Veterans’ Affairs 

House Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

House Committee on Oversight and Government Reform 

Senate Committee on Veterans’ Affairs 

Senate Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

Senate Committee on Homeland Security and Governmental Affairs 

National Veterans Service Organizations 

Government Accountability Office 

Office of Management and Budget 

This report will be available in the near future on the OIG’s Web site at 

http://www.va.gov/oig/publications/reports-list.asp. This report will remain on the OIG 

Web site for at least 2 fiscal years after it is issued. 

VA Office of Inspector General 26