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# Defense Logistics Agency provides lower pharmaceutical pricing to DOD customers, realizes over $264 million in cost avoidance for fiscal year 2023  

By Alison WelskiDLA Troop Support Public Affairs

                PHILADELPHIA  –              
The Defense Logistics Agency Troop Support’s Medical supply chain realized $264 million in cost avoidance for fiscal year 2023 by negotiating contracts with vendors, providing lower pharmaceutical pricing to Department of Defense beneficiaries.

“Cost avoidance tracks each drug’s cost, compares it to the cost before DLA’s contracting actions and includes credit for that amount,” said Jason Wray, integrated supply team chief. “In the end, beneficiaries have the advantage of getting lower priced items that are also backed by DLA’s strict quality control standards.”

Contract negotiations include prime vendors and distributors of medical supplies, procuring items at a lower cost.

“We leverage our buying power by combining the requirements of the warfighter and whole of government partners, like Veterans Affairs, Bureaus of Prisons and Indian Health Services,” Wray said. “This yields a fixed price on generic drugs for the first year of the contract.

“Contracts are renewable for up to four years,” he continued. “If the pricing lowers after the first contract year, we can renegotiate the contract.”

Commercial vendor relationships developed over time also help maintain a high-level of customer support, increasing DLA’s ability to account for any unforeseen circumstances.

“Our key to rapidly improving customer service at lower costs was to adopt commercial practices, reap their efficiencies for our operations, and make it easy and profitable for commercial vendors to support us," said Ruth Herman, pharmaceutical prime vendor chief.

Working with vetted vendors who complete a DLA internal technical evaluation helps secure the quality of the items procured.

“We look at past U.S. Food and Drug Administration approval, if vendors are Trade Agreement Act compliant and if the product is sourced from an FDA approved facility,” Wray said. “Once deemed technically acceptable by the DLA contracting office and pharmacists, the company offering the lowest price wins the contract.”

Avoiding high distribution fees is also part of contract negotiation, so the warfighter and partners can avoid costly delivery charges.

Cost avoidance engineering is used to procure other items in the medical supply chain, including joint national contracts, electronic catalog, medical/surgical prime vendor and radiology/imaging. Total cost avoidance for the entire supply chain totaled over $2.1 billion in fiscal year 2023.

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