GAO

United States General Accounting Office

Report to the Ranking Member, 

Committee on Veterans’ Affairs, U.S. 

Senate

January 2001 VA DRUG 

FORMULARY

Better Oversight Is 

Required, but Veterans 

Are Getting Needed 

Drugs

GAO-01-183

Page 1 GAO-01-183 VA Drug Formulary Oversight

Letter 3

Appendixes Appendix I: Scope and Methodology 24

Appendix II: Comments From the Department of Veterans Affairs 29

Appendix III: GAO Contact and Staff Acknowledgments 33

Related GAO Products 34

Tables Table 1: Percentage of Total Outpatient Prescriptions Filled for 

National Formulary Drugs by VISN and Medical Centers 

Within Each VISN, October 1999 Through March 2000 13

Table 2: Ease of Obtaining Nonformulary Drug Approvals Reported

by Prescribers 17

Table 3: Likelihood of Prescribers’ Converting Patients From 

Nonformulary Drug Prescriptions to Formulary Drug 

Prescriptions 17

Table 4: Prescribers Reported Current Formulary Helps More Than 

Hinders Their Ability to Prescribe Drugs 19

Table 5: Questionnaire Sample and Response Size 26

Figures Figure 1: Variation in Number of Unique Drugs VISNs Added to 

Supplement National Formulary, June 1997—March 2000 11

Figure 2: Medical Center Modifications to Formulary Closed Classes 12

Figure 3: Steps Generally Followed to Obtain Nonformulary and 

Formulary Drugs 15

Abbreviations

FDA Food and Drug Administration

IOM Institute of Medicine

PBM Pharmacy Benefits Management Strategic Healthcare Group

P&T pharmacy and therapeutics

VA Department of Veterans Affairs

VHA Veterans Health Administration

VISN Veterans Integrated Service Network
Page 2 GAO-01-183 VA Drug Formulary Oversight
Page 3 GAO-01-183 VA Drug Formulary Oversight

United States General Accounting Office

Washington, D.C. 20548 Letr

January 29, 2001

The Honorable John D. Rockefeller IV

Ranking Member

Committee on Veterans’ Affairs

United States Senate

Dear Senator Rockefeller:

The large number of drugs manufactured to treat various medical 

conditions has led health care organizations to develop lists of medications 

that they encourage their health care providers to use when they write 

prescriptions for patients. These lists of medications, grouped by 

therapeutic class, are known as drug formularies. Organizations prefer, and 

sometimes require, that these drugs be used as the provider’s first choice 

because organizations believe these drugs represent the best value among 

therapeutic choices and because by concentrating their purchases 

organizations can secure better prices.

As early as 1955, the Department of Veterans Affairs’ (VA) medical centers 

began using formularies to manage their pharmacy inventories, and until 

recently each of VA’s 173 medical centers maintained its own formulary. In 

June 1997, VA established its national formulary by consolidating locally 

developed and managed formularies into a core list of drugs. The national 

formulary was intended to give health care providers who have outpatient 

prescription privileges the same list of formulary drugs no matter where in 

the VA system they practice medicine, and to assure veterans that they will 

have access to the same group of formulary drugs for their treatment at all 

VA medical centers no matter where they seek care. VA medical centers 

were directed to make all national formulary drugs available to prescribers. 

To provide flexibility in meeting local patient needs, VA allows its 22 

regional Veterans Integrated Service Networks (VISN) to add drugs locally 

to supplement the national formulary and requires them to establish 

approval processes for prescribers to obtain drugs not listed on their 

formularies. 

Over the past few years, you and others in the Congress have raised 

questions about VA’s national formulary. In December 1999, we issued a 
Page 4 GAO-01-183 VA Drug Formulary Oversight

report addressing your interest in how VA manages its national formulary.1

In June 2000, the Institute of Medicine (IOM), as mandated by the Congress 

in House Report 105-610, issued its report on the effect VA’s national 

formulary has had on the cost and quality of VA health care, the 

restrictiveness of VA’s national formulary, and how the national formulary 

compares with private and other government formularies.2

To supplement the findings of our December 1999 report, you asked us to 

review (1) the impact of national formulary implementation by VISNs and 

medical centers on VA’s goal of standardizing its formulary and (2) VISN 

and medical center processes for obtaining nonformulary outpatient 

prescriptions. You also asked that we examine whether VA’s national 

formulary allows health care providers to prescribe the medications they 

believe their patients need. 

To address these VA formulary issues, we reviewed the formulary policies 

and activities of VA’s central office and its VISNs and compiled and 

analyzed nationwide VA prescription data. To assess implementation at the 

local level, we also discussed formulary issues with VA officials at three 

medical centers we visited in three different VISNs. We selected these 

medical centers on the basis of their percentage of prescriptions filled for 

formulary drugs. At your request, we also conducted a survey of 2,000 

health care providers who have VA prescription writing privileges 

(prescribers) to determine whether they believe implementation of the 

national formulary has adversely affected their ability to prescribe needed 

medications for the veterans they treat. In addition, we reviewed the 

congressionally mandated IOM assessment of VA’s national formulary 

issued in June 2000, and we incorporated its pertinent results in our report.

Appendix I contains further details of our scope and methodology. We 

performed our work between January 2000 and January 2001 in accordance 

with generally accepted government auditing standards. 

1

VA Health Care: VA’s Management of Drugs on Its National Formulary (GAO/HEHS-00-34, 

Dec. 14, 1999).

2

IOM, Description and Analysis of the VA National Formulary (Washington, D.C.: IOM, June 

2000).
Page 5 GAO-01-183 VA Drug Formulary Oversight

Results in Brief While VA has made significant progress in establishing a national 

formulary, it has not provided sufficient oversight to ensure that it is fully 

achieving its national formulary goal of standardization. For example, not 

all VISNs’ medical centers are in compliance with the national formulary. 

Specifically, two of the three facilities we visited, each in a separate VISN, 

omitted more than 140 required national formulary drugs, and all three 

facilities inappropriately modified the national formulary list of required 

drugs for certain drug classes by adding or omitting some drugs. As VA 

policy allows, VISNs have added drugs to supplement the national 

formulary, ranging from 5 drugs at one VISN to 63 drugs at another. 

However, the wide variation in the number of drugs added by the VISNs 

raises concern that this practice, if not appropriately monitored, may result 

in unacceptable decreases in formulary standardization. To address this 

issue, VA plans to begin reviewing new drugs approved by the Food and 

Drug Administration (FDA) to determine if they will be added to the 

national formulary or if VISNs may continue to add them to their 

formularies to supplement the national formulary. 

The approval process for the use of nonformulary drugs across VA’s health 

care system does not ensure that all facilities have an efficient and timely 

process. We found wide variability in how requests are made, who 

approves such requests, and how much time it takes. Similarly, IOM 

determined that many variants of the nonformulary approval process were 

being used. In addition, VA does not have systematic data to determine the 

extent to which nonformulary drugs are being requested, approved, or 

denied. Although VISNs are required to establish systems to analyze such 

requests, 12 of the 22 VISNs have not done so. As a result, VA does not 

know whether approved requests met established criteria or whether 

denied requests were appropriate.

VA health care providers who prescribe drugs generally reported that 

veterans get the drugs they need. These prescribers reported that the 

national formulary generally contains the drugs their patients need or, 

when necessary, prescribers can usually get nonformulary drugs. Despite 

their overall satisfaction, we believe the weaknesses we identified merit 

correction. Consequently, we are recommending that VA (1) ensure 

compliance with national formulary policy, (2) ensure that drugs added to 

supplement the national formulary do not inappropriately decrease 

formulary standardization, and (3) improve the nonformulary process. In 

responding to a draft of this report, VA agreed with our findings and 

concurred with our recommendations.
Page 6 GAO-01-183 VA Drug Formulary Oversight

Background In fiscal year 2000, VA’s Veterans Health Administration (VHA) provided 

primary and specialty medical care to approximately 3.2 million veterans at 

a cost of about $18 billion. VA’s pharmacy benefit cost approximately $2 

billion—about 12 percent of the total VHA budget—and provided 

approximately 86 million prescriptions. In contrast, 10 years ago VA’s 

pharmacy benefit represented about 6 percent of VA’s total health care 

budget.

Health care organizations’ efforts to control pharmacy costs and improve 

quality of care include (1) implementing formularies that limit the number 

of drug choices available; (2) establishing financial incentives, such as 

variable copayments, to encourage the use of formulary drugs; (3) using 

compliance programs, such as prior authorization, that encourage or 

require physicians to prescribe formulary drugs; and (4) developing clinical 

guidelines for prescribing drugs. 

VA does not have authority to use financial incentives to encourage 

compliance with its formulary. VA provides outpatient pharmacy services 

free to veterans receiving medications for treatment of service-connected 

conditions and to low-income veterans whose incomes do not exceed a 

threshold amount. Other veterans who have prescriptions filled by VA may 

be charged $2 for each 30-day supply of medication.3

In 1995, VA began transforming its delivery and management of health care 

to expand access to care and increase efficiency. As part of this 

transformation, VA decentralized decision-making and budgeting authority 

to 22 VISNs, which became responsible for managing all VA health care. 

VISNs were given substantial operational autonomy. Although VISN and 

medical center directors are held accountable in annual performance 

agreements for meeting certain national and local goals, attaining 

formulary goals has not been part of their performance standards. 

VA medical centers began using formularies as early as 1955 to manage 

their pharmacy inventories. Because of the geographic mobility of VA 

patients, VA officials believed that a national formulary would improve 

3

The Veterans Millennium Health Care and Benefits Act (P.L. 106-117, Nov. 30, 1999) 

authorized the Secretary of the Department of Veterans Affairs to increase the current $2 

copayment for each 30-day supply of medication and to establish maximum monthly and 

maximum annual pharmaceutical copayments for veterans who have multiple outpatient 

prescriptions. To date, VA has not implemented a change in the copayment amount.
Page 7 GAO-01-183 VA Drug Formulary Oversight

veterans’ continuity of care. In September 1995, VA established a 

centralized group to manage its pharmacy benefit on a nationwide basis. In 

November 1995, VISNs were established, and the Under Secretary for 

Health directed each VISN to develop and implement a VISN-wide 

formulary. To develop their formularies, the VISNs generally combined 

existing medical center formularies and eliminated rarely prescribed drugs. 

VISN formularies became effective on April 30, 1996. Also in 1996, the 

Congress required VA to improve veterans’ access to care regardless of the 

region of the United States in which they live. As part of its response, VA 

implemented a national drug formulary on June 1, 1997, by combining the 

core set of drugs common to the newly developed VISN formularies. In 

addition to the national and VISN formularies, a few medical centers 

retained their own formularies.

VA’s Pharmacy Benefits Management Strategic Healthcare Group (PBM) is 

responsible for managing the national formulary list, maintaining databases 

that reflect drug use, and monitoring the use of certain drugs. VISN 

directors are responsible for implementing and monitoring compliance 

with the national formulary, ensuring that VISN restrictions placed on 

national formulary products are appropriate, and ensuring that a 

nonformulary drug approval process is functioning in all of their medical 

centers. 

As all formularies do, VA’s national formulary limits the number of drug 

choices available to health care providers. VA’s formulary lists more than 

1,100 unique drugs that are assigned to 1 of 254 drug classes—groups of 

drugs similar in chemistry, method of action, or purpose of use. After 

performing reviews of drug classes representing the highest costs and 

volume of prescriptions, VA decided that some drugs in 4 of its 254 drug 

classes were therapeutically interchangeable—that is, essentially 

equivalent in terms of efficacy, safety, and outcomes—and therefore had 

the same therapeutic effect. This determination allowed VA to select one or 

more of these drugs for its formulary to seek better prices through 

competitively bid committed-use contracts.4

 Other therapeutically 

equivalent drugs in these classes were then excluded from the formulary. 

These four classes are known as “closed” classes. VA has not made clinical 

decisions regarding therapeutic interchange in the remaining 250 drug 

4

Under committed-use contracts, VA commits to use primarily the contract drug, instead of 

other therapeutically interchangeable drugs, to guarantee drug companies a high volume of 

use in exchange for lower prices.
Page 8 GAO-01-183 VA Drug Formulary Oversight

classes, and it does not limit the number of drugs that can be added to 

these classes. These are known as “open” classes. 

In some cases, drugs listed on the national formulary may be restricted. 

Restrictions are generally placed on the use of drugs if they have the 

potential to be used inappropriately. For example, restrictions are placed 

on drugs with potentially serious side effects, such as interferon, which is 

used to treat such conditions as hepatitis C. VA has also adopted guidelines 

to assist practitioners in making decisions about the diagnosis, treatment, 

and management of specific clinical conditions, such as congestive heart 

failure. In addition, VA has adopted criteria to help standardize treatment, 

improve the quality of patient care, and promote cost-effective drug 

prescriptions. Finally, VA limits prescribing privileges for some drugs to 

specially trained physicians and requires consultation with a specialist 

before certain drugs can be prescribed.

National Formulary 

Standardization Not 

Yet Achieved

VA has made significant progress in establishing a national formulary, with 

most drugs being prescribed from the formulary list. Nevertheless, VA’s 

oversight has not been sufficient to ensure that it is fully achieving its 

national formulary goal of standardizing its drug benefit nationwide. We 

found that some facilities have omitted required national formulary drugs. 

In addition, the extent to which VISNs add drugs to supplement the 

national formulary has the potential for conflicting with VA’s ability to 

achieve standardization if not closely managed. Also, we found that some 

facilities, contrary to policy, have modified the list of drugs available in 

closed classes. 

National Formulary Drugs 

Were Omitted From 

Formularies in Medical 

Centers We Visited

Almost 3 years after VA facilities were directed to make available locally all 

national formulary drugs, two of the three medical centers we visited did 

not list all national formulary drugs in the formularies used by their 

prescribers. VHA’s national formulary policy directive states that items 

listed on the national formulary shall be made available throughout the VA 

health care system and must be available in all VA facilities.5

 While a 

physical supply of all national formulary drugs is not required to be 

maintained at all facilities, if a clinical need for a particular formulary drug 

5

Items on the national formulary include both drugs and medical and surgical supply items, 

such as diabetic supplies and bandages. Our study focused exclusively on drugs.
Page 9 GAO-01-183 VA Drug Formulary Oversight

arises in the course of treating a patient, it must be made available to the 

patient. 

Many drugs listed on the national formulary were not available as 

formulary choices in two of the three medical centers we visited. In the 

first, about 25 percent (286 drugs) of the national formulary drugs were not 

available as formulary choices. These included drugs used to treat high 

blood pressure and mental disorders, as well as drugs used to treat the 

unique medical needs of women. At the second medical center, about 13 

percent (147 drugs) of the national formulary drugs were omitted, 

including drugs used to treat certain types of cancer and others used to 

treat stomach conditions.

Health care providers at these two medical centers were required to seek 

nonformulary drug approvals for over 22,000 prescriptions of national 

formulary drugs from October 1999 through March 2000. If the national 

formulary had been properly implemented at these medical centers, 

prescribers would not have had to use extra time to request and obtain 

nonformulary drug approvals for these drugs, and patients could have 

started treatment earlier. Our analysis showed that over 14,000 

prescriptions were filled as nonformulary drugs for 91 of the 286 drugs at 

the first center.6

 No prescriptions were filled for the remaining 195 drugs. 

At the other medical center, over 8,000 prescriptions for 23 of the 147 drugs 

were filled as nonformulary drugs. No prescriptions were filled for the 

remaining 124 drugs.

Drugs Added to Supplement 

the National Formulary 

Decrease Standardization

VA’s policy allowing VISNs to supplement the national formulary locally has 

the potential for conflicting with VA’s ability to achieve standardization if 

not closely managed. From June 1997 through March 2000, VISNs added 

244 unique drugs to supplement the list of drugs on the national formulary. 

The number of drugs added by each VISN varies widely, ranging from as 

many as 63 by VISN 20 (Portland) to as few as 5 by VISN 8 (Bay Pines). 

(Fig. 1 shows the number of drugs added by each VISN.) Adding drugs to 

supplement the national formulary is intended to allow VISNs to be 

responsive to the unique needs of their patients and to allow quicker

6

After our visit, we were informed by a pharmacy official that the medical center adopted 

the national formulary as its own on June 30, 2000.
Page 10 GAO-01-183 VA Drug Formulary Oversight

formulary designation of new FDA-approved drugs.7 However, the wide 

variation in the number of drugs added by the VISNs to supplement the 

national formulary raises concern that this practice, if not appropriately 

monitored, could result in unacceptable decreases in formulary 

standardization. VA officials have acknowledged that this variation affects 

standardization and told us they plan to address it. For example, the PBM 

plans to review new drugs when approved by the FDA to determine if they 

will be added to the national formulary or if VISNs may continue to add 

them to their formularies to supplement the national formulary. 

7

VA formulary policy provides that a new drug must be on the market for a minimum of 1 

year before it can be added to the national formulary.
Page 11 GAO-01-183 VA Drug Formulary Oversight

Figure 1: Variation in Number of Unique Drugs VISNs Added to Supplement National Formulary, June 1997—March 2000 

Source: GAO analysis of data from VA’s PBM. 

0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

VISN

Number of Drugs Added

Number of Drugs Added

0 to 10

11 to 25

26 to 50

More Than 50

Numbered Areas Specify VISN Designations
Page 12 GAO-01-183 VA Drug Formulary Oversight

Medical Centers 

Inappropriately Modified 

the List of Drugs in Closed 

Classes 

The medical centers we visited also inappropriately modified the national 

formulary list of drugs in the closed classes. Contrary to VA formulary 

policy, two of three medical centers added two different drugs to two of the 

four closed classes, and one facility did not make a drug available (see fig. 

2). 

Figure 2: Medical Center Modifications to Formulary Closed Classes

a

Drug purchased under national committed-use contract.

Source: VA medical centers.

While our analysis was performed at the medical center level, the IOM 

found similar nonconformity at the VISN level. Specifically, IOM reported 
Page 13 GAO-01-183 VA Drug Formulary Oversight

that 16 of the 22 VISNs modified the list of national formulary drugs for the 

closed classes.8

Most Prescribed Drugs Are 

on the National Formulary

From October 1999 through March 2000, 90 percent of VA outpatient 

prescriptions were written for national formulary drugs. The percentage of 

national formulary drug prescriptions filled by individual VISNs varied 

slightly, from 89 percent to 92 percent. We found wider variation among 

medical centers within VISNs—84 percent to 96 percent (see table 1).

Table 1: Percentage of Total Outpatient Prescriptions Filled for National Formulary 

Drugs by VISN and Medical Centers Within Each VISN, October 1999 Through March 

2000

8

IOM, Description and Analysis of the VA National Formulary, pp. 32-3.

VISN

(office location)

Percentages of

prescriptions filled using

national formulary drugs

Range of percentages of

prescriptions filled using national

formulary drugs, by medical

centers within VISNs

1 (Boston) 91 89—93

2 (Albany) 89 88—91

3 (Bronx) 89 87—94

4 (Pittsburgh) 91 87—94

5 (Baltimore) 90 87—94

6 (Durham) 90 88—92

7 (Atlanta) 90 88—92

8 (Bay Pines) 90 87—93

9 (Nashville) 92 89—95

10 (Cincinnati) 92 90—94

11 (Ann Arbor) 91 87—94

12 (Chicago) 92 89—94

13 (Minneapolis) 91 90—93

14 (Omaha) 89 84—92

15 (Kansas City) 92 89—96

16 (Jackson) 90 87—94

17 (Dallas) 90 88—91

18 (Phoenix) 92 85—95
Page 14 GAO-01-183 VA Drug Formulary Oversight

Source: VA’s PBM outpatient prescription database.

The remaining 10 percent of prescriptions filled systemwide were for drugs 

VISNs and medical centers added to supplement the national formulary or 

for nonformulary drugs. VA’s PBM and IOM estimate that drugs added to 

supplement the national formulary probably account for about 7 percent of 

all prescriptions filled and nonformulary drugs account for approximately 3 

percent of all prescriptions filled. However, at the time of our review, VA’s 

nationwide data could identify a filled prescription only as either a national 

formulary drug or not. Without specific information, VA does not know if 

the additions are resulting in an appropriate balance between local needs 

and national formulary standardization. VA officials told us that they are 

modifying the database to enable it to identify which drugs are added to 

supplement the national formulary and which are nonformulary.

Approval Processes for 

Nonformulary Drugs 

Have Weaknesses

Medical center approval processes for nonformulary drugs are not always 

timely, and the amount of time needed to obtain such approvals varied 

widely across medical centers. In addition, some VISNs have not 

established processes to collect and analyze data on nonformulary 

requests. As a result, VA does not know if approved requests met its 

established criteria or if denied requests were appropriate. 

Time to Process 

Nonformulary Drug 

Approvals Varies Among 

Facilities

Although the national formulary directive requires certain criteria for 

approval of nonformulary drugs, it does not dictate a specific nonformulary 

approval process. As a result, the processes health care providers must 

follow to obtain nonformulary drugs differ among VA facilities regarding 

how requests are made, who receives them, who approves them, and how 

long it takes. In addition, IOM documented wide variations in the 

nonformulary drug approval process. Figure 3 shows the steps prescribers 

must generally follow to obtain nonformulary and formulary drugs.

19 (Denver) 92 90—94

20 (Portland) 91 84—94

21 (San Francisco) 92 90—93

22 (Long Beach) 92 90—94

VA systemwide 90 84—96

(Continued From Previous Page)

VISN

(office location)

Percentages of

prescriptions filled using

national formulary drugs

Range of percentages of

prescriptions filled using national

formulary drugs, by medical

centers within VISNs
Page 15 GAO-01-183 VA Drug Formulary Oversight

Figure 3: Steps Generally Followed to Obtain Nonformulary and Formulary Drugs

Source: GAO survey and interviews with VA officials.

The person who first receives a nonformulary drug approval request may 

not be the person who approves it. For example, 61 percent of prescribers 

reported that nonformulary drug requests must first be submitted to a 

facility pharmacist, 14 percent said they must first be submitted to facility 

pharmacy and therapeutics (P&T) committees, and 8 percent said they 

must first be sent to service chiefs. In contrast, 31 percent of prescribers 

reported that it is a facility pharmacist who approves nonformulary drug 

requests, 26 percent said that the facility P&T committee approves them, 
Page 16 GAO-01-183 VA Drug Formulary Oversight

and 15 percent told us that the facility chief of staff approves them. The 

remaining 28 percent reported that various other facility officials or 

members of the medical staff approve nonformulary drug requests.

The time required to obtain approval for use of a nonformulary drug varied 

greatly depending on the local approval processes. The majority of 

prescribers (60 percent) we surveyed reported that it took an average of 9 

days to obtain approval for use of nonformulary drugs.9

 But many 

prescribers also reported that it took only a few hours (18 percent) or 

minutes (22 percent) to obtain such approvals.

During our medical center visits, we observed that some medical center 

approval processes are less convenient than others. For example, to obtain 

approval to use a nonformulary drug in one facility we visited, prescribers 

were required to submit a request in writing to the P&T committee for its 

review and approval. Because the P&T committee met only once a month, 

the final approval to use the requested drug was sometimes delayed as long 

as 30 days. The requesting prescriber, however, could write a prescription 

for an immediate 30-day supply if the medication need was urgent. 

In contrast, in another medical center we visited, a clinical pharmacist was 

assigned to work directly with health care providers to help with drug 

selection, establish dose levels, and facilitate the approval of nonformulary 

drugs. In that facility, clinical pharmacists were allowed to approve the use 

of nonformulary drugs. If a health care provider believed that a patient 

should be prescribed a nonformulary drug, the physician and pharmacist 

could consult at the point of care and make a final decision with virtually 

no delay. 

Prescribers in our survey were almost equally divided on the ease or 

difficulty of getting nonformulary drug requests approved (see table 2). 

9

In emergencies, exceptions are made to allow the patient to obtain the drug more quickly.
Page 17 GAO-01-183 VA Drug Formulary Oversight

Table 2: Ease of Obtaining Nonformulary Drug Approvals Reported by Prescribers

Note: Percentages do not total 100 because of rounding.

Source: GAO survey.

Regardless of whether the nonformulary drug approval process was 

perceived as easy or difficult, the vast majority of prescribers told us such 

requests were generally approved. According to our survey results, 65 

percent of prescribers sought approval for a nonformulary drug in 1999. 

These prescribers reported that they made, on average, 25 such requests 

(the median was 10 requests). We estimated that 84 percent of all 

prescribers’ nonformulary requests were approved.

When a nonformulary drug request was disapproved, 60 percent of 

prescribers reported that they switched to a formulary drug. However, 

more than one-quarter of the prescribers who had nonformulary drug 

requests disapproved resubmitted their requests with additional 

information. 

The majority of prescribers we surveyed told us they were more likely to 

convert VA patients who were on nonformulary drugs obtained at another 

VA facility to formulary drugs than to request a nonformulary drug (see 

table 3). 

Table 3: Likelihood of Prescribers’ Converting Patients From Nonformulary Drug 

Prescriptions to Formulary Drug Prescriptions

Source: GAO survey.

Response categories Percentage reporting

“Easy” or “very easy” 29

“About as easy as difficult” 40

“Difficult” or “very difficult” 32

Response categories Percentage reporting

“Likely to convert” or “very likely to convert” 64

“As likely to convert as to seek approval for the nonformulary 

drug” 18

“Likely to seek approval for the nonformulary drug” or “very 

likely to seek approval of nonformulary drug” 18
Page 18 GAO-01-183 VA Drug Formulary Oversight

Consequently, patients who move from one area of the country to another 

or temporarily seek care in a different VA facility are likely to be switched 

from a nonformulary drug to a formulary drug.

Some VISNs Are Not 

Collecting and Analyzing 

Nonformulary Drug Data as 

Required

VA’s national formulary policy requires that a request to use a nonformulary 

drug be based on at least one of six criteria: (1) the formulary agent is 

contraindicated, (2) the patient has had an adverse reaction to the 

formulary agent, (3) all formulary alternatives have failed therapeutically, 

(4) no formulary alternative exists, (5) the patient has previously 

responded to the nonformulary agent and risk is associated with changing 

to the formulary agent, and (6) other circumstances involving compelling 

evidence-based reasons exist. Each VISN is responsible for establishing a 

process to collect and analyze data concerning nonformulary drug 

requests. 

Contrary to the national formulary policy, not all VISNs have established a 

process to collect and analyze nonformulary request data at the VISN and 

local levels. Twelve of VA’s 22 VISNs reported that they do not collect 

information on approved and denied nonformulary drug requests. Three 

VISNs reported that they collect information only on approved 

nonformulary drug requests, and seven reported that they collect 

information for both approved and denied requests. Consequently, data 

that could help VISNs, medical centers, and the PBM offices are not always 

collected and analyzed for trends in a systematic manner. Such information 

could help VA at all levels to determine the extent to which nonformulary 

drugs are being requested and whether medical center processes for 

approving these requests meet established criteria. In its report, IOM noted 

that inadequate documentation could diminish confidence in the 

nonformulary process.

Prescribers Report 

Having Access to the 

Drugs Veterans Need

Seventy percent of VA prescribers in our survey reported that the formulary 

they use contains the drugs their patients need either to a “great extent” or 

to a “very great extent.” Twenty-seven percent reported that the formulary 

meets their patients’ needs to a “moderate extent,” with 4 percent reporting 

that it meets their patients’ needs to “some extent.” No VA prescribers 

reported that the formulary meets their patients’ needs to a “very little or 

no extent.” This is consistent with IOM’s conclusion that the VA formulary 

“is not overly restrictive.”
Page 19 GAO-01-183 VA Drug Formulary Oversight

Overall, two and one-half times as many prescribers indicated that the 

formulary they currently use “helps” or “greatly helps” their ability to 

prescribe drugs as those who said it “hinders” or “greatly hinders” them 

(see table 4). 

Table 4: Prescribers Reported Current Formulary Helps More Than Hinders Their 

Ability to Prescribe Drugs

Source: GAO survey.

Some prescribers reported that the formulary they use helps them keep 

current with new drugs and helps remove some of the pressures created by 

direct-to-consumer advertising. Other prescribers reported that newly 

approved drugs are not made available on the national formulary as soon as 

they would like, and some reported their frustration with delays 

experienced when certain formulary drugs must be approved by specially 

trained physicians before they can be prescribed.

Prescribers we surveyed reported they were generally satisfied with the 

national formulary. We asked prescribers who said that they had worked 

for VA before the national formulary was established whether the current 

formulary does a better job of keeping the list of drugs in the drug classes 

from which they most frequently prescribe up to date, as compared with 

the formulary they used to use. Three-quarters told us that they had worked 

for VA before the national formulary was implemented in June 1997. Thirtyeight percent of these prescribers reported that the national formulary was 

“better” or “considerably better” than previous formularies. About half (48 

percent) indicated that the current formulary was “about the same” as the 

one it replaced. Seven percent reported that it was “worse” or 

“considerably worse” than previous formularies. 

Few veterans have complained about not being able to obtain the drugs 

they believe they need. At the VA medical centers we visited, patient 

Response categories Percentage responding

“Helps” or “greatly helps” 48

“Helps as much as hinders” 34

“Hinders” or “greatly hinders” 18
Page 20 GAO-01-183 VA Drug Formulary Oversight

advocates10 told us that veterans made very few complaints concerning 

their prescriptions. In its analysis of the patient advocates’ complaint 

databases, IOM found that less than one-half of one percent of veterans’

complaints were related to drug access.11 IOM further reported that 

complaints involving specific identifiable drugs often involved drugs that 

are marketed directly to consumers, such as sildenafil (Viagra), which is 

used to treat erectile dysfunction.12 Fifty-one percent of the prescribers in 

our survey reported that over the past 3 years, an increasing number of 

their patients have requested a drug they have seen or heard advertised in 

the media. Our review also indicated that the few prescription complaints 

made were often related to veterans’ trying to obtain “lifestyle” drugs or 

refusals by VA physicians and pharmacists to fill prescriptions written by 

non-VA health care providers.13 VA officials told us that VA does not fill 

prescriptions written by non-VA-authorized prescribers, in part to ensure 

that one practitioner manages a patient’s care.

Conclusions Over the past 31⁄2 years, VA has made significant progress in establishing its 

national formulary, which has generally met with prescriber acceptance. 

Prescribers reported that veterans are generally receiving the drugs they 

need and that veterans rarely register complaints concerning prescription 

drugs.

VA has not provided sufficient oversight, however, to ensure that VISNs and 

medical centers comply with formulary policies and that the flexibility 

given to them does not unduly compromise VA’s goal of formulary 

standardization. Contrary to VA formulary policy, some facilities omitted 

national formulary drugs or modified the closed drug classes. While adding 

10Patient advocates are VA employees who are responsible for receiving and acting on 

complaints from veterans.

11IOM obtained formulary-related complaints from a nationwide database of veteran 

complaints for over 90 percent of all VA facilities representing all 22 VISNs. IOM determined 

that only 2,385 of 570,937 veteran complaints were attributed to the national formulary. No 

VISN had significantly more complaints than any other. (IOM, Description and Analysis of 

the VA National Formulary, p. 145).

12Sildenafil is available within VA only through the nonformulary drug approval process.

13We asked prescribers in our survey how often in 1999 their patients asked them to rewrite 

a prescription from a non-VA prescriber so that it could be filled by VA. Thirty-one percent 

said “often” or “very often,” 34 percent reported that it occurred “occasionally,” and 21 

percent said “seldom.” Fourteen percent said that they never received such requests.
Page 21 GAO-01-183 VA Drug Formulary Oversight

a limited number of drugs to supplement the national formulary is 

permitted, as more drugs are added by VISNs, formulary differences among 

facilities are likely to become more pronounced, decreasing formulary 

standardization. While VA recognizes the trade-off between local flexibility 

and standardization, it lacks criteria for determining the appropriateness of 

adding drugs to supplement the national formulary. Consequently, VA 

cannot determine whether the resulting decrease in standardization is 

acceptable. Not all VISN directors have met their responsibilities for 

implementing national formulary policy.

Inefficiencies that exist in the nonformulary drug approval processes 

across the system can cause delays in making final treatment decisions. In 

addition, the processes require health care provider time and energy that 

might be better used for direct patient care. We believe a more efficient 

nonformulary drug approval process could enable facilities to benefit from 

lessons learned in other locations. Finally, VISNs lack the data needed to 

analyze nonformulary drug requests to determine whether all approved 

requests met approval criteria and all denied requests were appropriate.

Recommendations for 

Executive Action

In order to ensure more effective management of the national formulary, 

we recommend that the Secretary of Veterans Affairs direct the Under 

Secretary for Health to take the following actions:

• Establish a mechanism to ensure that VISN directors comply with 

national formulary policy.

• Establish criteria that VISNs should use to determine the 

appropriateness of adding drugs to supplement the national formulary 

and monitor the VISNs’ application of these criteria. 

• Establish a nonformulary drug approval process for medical centers 

that ensures appropriate and timely decisions and provides that 

veterans for whom a nonformulary drug has been approved will have 

continued access to that drug, when appropriate, across VA’s health care 

system. 

• Enforce existing requirements that VISNs collect and analyze the data 

needed to determine that nonformulary drug approval processes are 

implemented appropriately and effectively in their medical centers, 

including tracking both approved and denied requests. 
Page 22 GAO-01-183 VA Drug Formulary Oversight

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, VA agreed with our findings and 

concurred with our recommendations. VA highlighted key improvements 

planned or already in progress that should further enhance the process. 

VA’s actions to address our recommendations are summarized below.

• VA plans to improve oversight at all organizational levels to help 

facilitate consistent compliance with national formulary policy. In its 

comments, VA discussed important components of improving 

compliance with the national formulary, including examining data to 

identify outliers. However, VA did not articulate a mechanism for 

ensuring that its oversight results in consistent compliance, which may 

reduce the effectiveness of its planned actions.

• VA plans to establish criteria for VISNs to use to determine the 

appropriateness of adding drugs to supplement the national formulary.

• VA plans to establish steps for its nonformulary drug approval process 

that all medical centers and VISNs must follow. However, in its 

comments, VA did not specifically address how veterans would have 

continued access to previously approved nonformulary drugs across 

VA’s health care system. We believe such access is important.

• VA plans to establish steps for reporting its nonformulary approval 

activities. In its comments, VA did not explicitly include tracking of 

denied requests as part of the nonformulary approval activities. We 

expect that its nonformulary approval activities will include tracking 

denied requests, as well as approved nonformulary drug requests, to 

determine the appropriateness of all medical center prescribing 

decisions.

VA plans to implement these corrective actions by June 2001. Its comments 

are included in appendix II.

We are sending copies of this report to the Honorable Anthony J. Principi, 

Secretary of Veterans Affairs; appropriate congressional committees; and 

other interested parties. We will also make copies available to others upon 

request. 
Page 23 GAO-01-183 VA Drug Formulary Oversight

Please call me at (202) 512-7101 if you or your staff have questions about 

this report or need additional assistance. Another contact and staff 

acknowledgments are listed in appendix III.

Sincerely yours,

Cynthia A. Bascetta, Director

Health Care—Veterans’ Health

 and Benefits Issues
Page 24 GAO-01-183 VA Drug Formulary Oversight

Appendix I

Scope and Methodology ApApenednxidxeiIs

To obtain policies and procedures from the 22 Veterans Integrated Service 

Networks (VISN), we mailed a questionnaire to each of the 22 VISN 

formulary leaders—pharmacists or physicians who serve on the 

Department of Veterans Affairs’ (VA) Pharmacy Benefits Management 

advisory board. To determine the extent to which VA health care providers 

write prescriptions for national formulary drugs, we analyzed data from 

VA’s national outpatient prescription database. To assess the 

implementation of the national formulary and obtain firsthand opinions 

about it, we interviewed medical and administrative staff at three VA 

medical centers located in three different VISNs. To obtain VA health care 

providers’ views on VA’s formulary, including whether or not it is 

restrictive, we mailed a questionnaire to a nationally representative sample 

of 2,000 VA health care prescribers. We also used information contained in 

the Institute of Medicine’s Description and Analysis of the VA National 

Formulary, issued in June 2000.

VISN Survey To obtain policies and procedures from the 22 VISNs, we mailed a 

questionnaire to VISN formulary leaders.1

 We asked if there were VISNwide policies for several areas, including adding drugs to the VISN 

formulary, requesting nonformulary drugs, converting patients from one 

drug to another, and tracking requests for nonformulary drugs. In addition, 

we sought information on the number of drugs added to and dropped from 

the VISN formulary, the number of requests for nonformulary drugs, and 

the number of requests that were approved and denied. All 22 VISN 

formulary leaders completed and returned questionnaires.

1

Each VISN has a formulary leader—typically a senior pharmacy manager or physician. 

Collectively, the 22 leaders compose a national advisory board that assists VA’s Pharmacy 

Benefits Management Strategic Healthcare Group (PBM) and its medical advisory panel. 

Formulary leaders are knowledgeable in pharmacological matters, including drugs and 

treatment practices, and in national and local formulary policies and procedures. The role of 

a formulary leader includes helping PBM decide what drugs will be added to or deleted from 

the national formulary, developing and adopting national policies affecting the use of drugs 

on the national formulary, and assisting with other matters the leaders or PBM officials raise 

during their periodic meetings.
Appendix I

Scope and Methodology

Page 25 GAO-01-183 VA Drug Formulary Oversight

Outpatient 

Prescription Database 

Analysis

VA’s national database on outpatient prescriptions contains information for 

each outpatient prescription filled at each VA medical center, including the 

drug prescribed, date of the prescription, patient and prescriber identifiers, 

medical center responsible for filling the prescription, and whether the 

prescribed drug is a national formulary drug. We used this database to

• develop a sample of VA health care providers who wrote prescriptions, 

• determine the total number of outpatient prescriptions filled at VISNs 

and VA medical centers, 

• determine the number of filled outpatient prescriptions written for 

national formulary drugs within a certain time frame,2

 and

• determine how many VISN formulary drug prescriptions were filled in 

the three VISNs where we performed site visits.

We interviewed PBM headquarters officials who had either oversight or 

maintenance responsibility for the database to help assess the validity and 

reliability of the outpatient prescription data. We also performed our own 

analytic checks of the data. We found that data critical to our analysis—the 

data field indicating whether a prescription had been written for a national 

formulary drug—contained errors. We worked with PBM officials to 

correct the data, and they implemented a monthly routine to detect and 

correct these errors in the future. We reran our data checks, verified that 

the database had been corrected, and concluded that the data were 

acceptable for the purposes of our work.

Site Visits To assess formulary implementation at the local level, we interviewed 

medical and administrative staff at three different VA medical centers—one 

located in Biloxi, Mississippi (VISN 16); one in Gainesville, Florida (VISN 

8); and one in Omaha, Nebraska (VISN 14). We selected these VISNs and 

medical centers on the basis of formulary drug use from October through 

December 1999, the period for which the most recent and complete data 

were available at the time we did our work. For example, VISN 8 had the 

highest percentage of prescriptions for national formulary drugs (93 

percent), VISN 16’s percentage of national formulary drug prescriptions 

was at the national average (90 percent), and VISN 14 had the lowest 

2

October 1, 1999, to March 31, 2000, was the time frame for which the most recent and 

complete data were available at the time of our work.
Appendix I

Scope and Methodology

Page 26 GAO-01-183 VA Drug Formulary Oversight

percentage of prescriptions filled using national formulary drugs (88 

percent). 

Questionnaire to 

Prescribers

We mailed questionnaires to a representative sample of 2,000 VA health 

care prescribers whose prescriptions had been dispensed from October 1 

through December 31, 1999, to obtain their opinions and experiential data 

on various aspects of VA’s national formulary. We drew this random sample 

from VA’s most recent national outpatient prescription database—a data 

file that contains information, including a prescriber identifier, on all 

outpatient prescriptions filled in the VA health care system.

We mailed questionnaires to the entire sample of prescribers on April 17, 

2000, with follow-up mailings on May 17 and June 21 to those who had not 

responded by those dates. We accepted returned questionnaires through 

September 1, 2000. Some prescribers’ responses indicated that they did not 

write prescriptions for drugs; their prescription privileges were limited to 

medical and surgical supplies, such as diabetic strips and food 

supplements. Other returned questionnaires indicated that the addressee 

had either left or retired from VA. These providers were thus considered 

ineligible for our purposes and were removed from the sample. 

Approximately 11 percent of the questionnaires were returned as 

undeliverable, and we received no response from approximately 16 percent 

of those to whom we mailed questionnaires. After adjusting the sample 

accordingly, we determined the number of useable returned questionnaires 

to be 1,217—a response rate of about 69 percent. (See table 5.)

Table 5: Questionnaire Sample and Response Size

Number

Total questionnaires mailed 2,000

Returned by nonprescribersa 225

Adjusted sample size 1,775

Not deliverable by Postal Service 226

Delivered but not returned 328

Received after closing date 4

Useable questionnaires returned 1,217

Final response rate 69%
Appendix I

Scope and Methodology

Page 27 GAO-01-183 VA Drug Formulary Oversight

a

These are uncompleted, but returned, questionnaires. They represent individuals who indicated that 

they either did not have drug prescribing privileges (50 people, or 2.6 percent of the sample) or had left 

or had retired from VA (175 people, or 8.7 percent of the sample.) These individuals would have been 

excluded from the original sample if that information had been known in advance. 

Because this was a simple random sample, we believe that our results are 

projectable to all of VA’s health care providers who have outpatient drug 

prescribing privileges.

Sampling Errors Surveys based on a sample are subject to sampling errors. Sampling error 

represents the extent to which a survey’s results differ from what would 

have been obtained had everyone in the universe of interest received and 

returned the same questionnaire—in this case, all VA health care providers 

who have outpatient drug prescribing privileges. Sampling errors have two 

elements: the width of the confidence interval around the estimate 

(sometimes referred to as the precision of the estimate) and the confidence 

level at which the confidence interval is computed.

The confidence interval reflects the fact that estimates actually encompass 

a range of possible values, not just a single value, or a “point estimate.” The 

interval is expressed as a point, plus or minus some value. For example, in 

our questionnaire, we asked prescribers, “To what extent does your VA 

formulary contain the drugs you believe your patients need?” The 

percentage of respondents who reported a “great extent” or “very great 

extent” was 69.1. This particular question had a confidence interval of plus 

or minus 2.6 percentage points. Thus, the “true” answer for this question 

may or may not be 69.1 percent, but it has a high probability of falling 

between 66.5 and 71.7 percent (69.1-percent point estimate, plus or minus 

2.6 percentage points). Confidence intervals vary for individual questions 

(depending upon how many of the individuals who could have answered a 

question actually did so), but, unless otherwise noted, all percentages 

presented in this report are within a range of plus or minus 3.5 percentage 

points.

The confidence level is a measure of how certain we are that the “true”

answer lies within a confidence interval. We used a 95-percent confidence 

level, which means that if we repeatedly took new samples of prescribers 

from the October through December prescription database and performed 

the same analysis of their responses each time, 95 percent of these samples 

would yield estimates that would fall within the confidence interval stated. 

In the previous example, this means that we are 95-percent certain that 

between 66.5 and 71.7 percent of prescribers believe that the VA formulary 
Appendix I

Scope and Methodology

Page 28 GAO-01-183 VA Drug Formulary Oversight

contains to a “great extent” or “very great extent” the drugs they believe 

their patients need.

Nonsampling Errors Surveys can also be subject to other types of systematic error or bias that 

can affect results, known as nonsampling errors. One potential source of 

nonsampling error can be the questionnaire itself. To ensure that questions 

were clear and unbiased, we consulted with subject matter and 

questionnaire experts within GAO and obtained comments from 

individuals representing VA’s PBM and medical advisory panel, a working 

group of 11 practicing VA physicians and 1 practicing Department of 

Defense physician who help manage VA’s national formulary, as well as 

individuals representing the Institute of Medicine. Finally, the 

questionnaire was tested with 14 VA prescribers in VA medical centers in 

four locations: Phoenix, Arizona; Washington, D.C.; Hampton, Virginia; and 

Cincinnati, Ohio.

Prescribers’ Demographics Prescribers were asked to provide demographic and VA employment 

information as well as opinions about the relevance and usefulness of VA’s 

formulary. On average, VA prescribers in our sample have worked for VA 

for 11 years, with most of those years at their current medical facility. 

Physicians and nurses constitute the largest groups of prescribers (65 and 

15 percent, respectively), followed by physician assistants (7 percent) and 

other allied health professionals, such as dentists (14 percent). Most of the 

prescribers’ time working in VA is spent treating patients—on average, 26 

hours each week. According to the national prescription file from which we 

drew our sample, VA prescribers who completed our questionnaire 

averaged 849 prescription fills from October through December 1999, the 3-

month period we chose as the basis of our survey. The median number of 

filled prescriptions was relatively low—252—because a few prescribers 

had a large number of prescriptions filled during the period, while many 

prescribers had only a few prescriptions filled. 
Page 29 GAO-01-183 VA Drug Formulary Oversight

Appendix II

Comments From the Department of Veterans 

Affairs ApendxiI
Appendix II

Comments From the Department of Veterans 

Affairs

Page 30 GAO-01-183 VA Drug Formulary Oversight
Appendix II

Comments From the Department of Veterans 

Affairs

Page 31 GAO-01-183 VA Drug Formulary Oversight
Appendix II

Comments From the Department of Veterans 

Affairs

Page 32 GAO-01-183 VA Drug Formulary Oversight
Page 33 GAO-01-183 VA Drug Formulary Oversight

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Walter Gembacz, (202) 512-6982

Staff 

Acknowledgments

George Poindexter, Stuart Fleishman, Mike O’Dell, and Kathie Kendrick 

made key contributions to this report.
Page 34 GAO-01-183 VA Drug Formulary Oversight

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(406187) Letr
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