Unauthorized and potentially counterfeit, dangerous surgical devices and medical supplies have flowed unchecked into the Department of Veterans Affairs supply chain and into VA operating rooms, according to internal agency correspondence from a major supplier who blamed new procurement rules.
The bogus supplies gained a foothold when the department started using reverse auctions to fulfill some contracts, according to both department officials and a 2012 memo from Johnson & Johnson, the world’s largest medical device business.
In the memo, the company told the VA it was getting surgical supplies bought from unauthorized distributors through the so-called “gray market,” and said those supplies raised serious questions about patient safety, according to emails obtained through the Freedom of Information Act.
Officials also warned the VA that an ongoing corporate investigation into the gray market showed how some unauthorized sellers were passing off products stolen from other hospitals.
“We do not believe that the VA intended for its efforts to utilize new procurement tools such as reverse auctions to result in these outcomes,” a company official wrote.
The Johnson & Johnson memo included a list of seven gray market surgical supply purchases by agency medical centers in a half-dozen states. But the company made clear there were more examples across the VA.
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The warnings were issued months after the VA had a fierce internal debate over using reverse auctions, which have sellers compete to offer goods or services at the lowest price.
A top contracting official, Jan Frye, had put a halt on reverse auctions earlier in 2012, citing a “groundswell” of complaints from VA suppliers. But within weeks, the VA reversed after fierce lobbying from FedBid, the politically connected contractor handling the VA’s reverse auction platforms.
An inspector general’s report earlier this year issued a scathing rebuke to the VA over its dealings with FedBid, and said a VA procurement official, Susan Taylor, had improper contacts with FedBid. The inspector general recommended FedBid be disbarred. Ms. Taylor resigned soon after the report.
Emails obtained by The Times show concerns about reverse auctions persisted.
According to Johnson & Johnson, a South Carolina VA facility received a delivery of “trocar” surgical devices from an unauthorized distributor that was sent to VA without a box and was instead wrapped in yellowed packaging and rubber bands.
“The product being sold may not have been stored properly (high temperature, high humidity, no pest control, etc.), which could create patient risk,” Paul B. Smith, government account director for the company, told the VA, explaining the results of an ongoing company investigation.
An internal VA advisory group also raised an alarm in 2012 in a closed meeting with VA’s senior procurement council, which is composed of the agency’s top acquisition officials. The group recommended that VA stop purchasing “clinically oriented products” through reverse auctions.
Among other issues, the advisory group said FedBid had blocked access to names and contact information for contracting officers. And FedBid officials weren’t qualified to handle clinical purchases, according to the group.
“They do not possess the clinical expertise to position themselves between the buyer and vendor,” the industry group wrote in a report, adding that some VA suppliers refused to participate in reverse auctions.
“As a result of limited participation, FedBid in some cases sourced products from unauthorized distributors,” the report stated. “This has both resulted in significantly increased costs and encouraged the use of ‘gray market’ or counterfeit products.”
In an email statement to The Washington Time, a FedBid spokesman said the company had “established measures to protect against unauthorized sellers and will suspend or remove sellers who attempt to undermine the integrity of the marketplace.”
The company also said that government contracting officers ultimately have a responsibility to ensure they’re buying the right products.
“As with every procurement process, whether it is a reverse auction, single source contract, or open tendering, each buyer has the responsibility to ensure that they are purchasing the right products for their customer,” FedBid spokesman Andres Mancini wrote in an email.
In an email on Friday responding to questions from The Times placed earlier this week, a VA spokeswoman said Johnson & Johnson raised the issue in 2012 with the Veterans Health Administration, which prompted the agency to initiate a validation process among small business suppliers.
Spokeswoman Genevieve Billia noted in an email that VA couldn’t say how often it finds counterfeit material, but noted, “VA has a process in place to identify such items that come in, sot that they do not get to the patient.”
In September, two years after Johnson & Johnson contacted the VA, the agency inspector general’s office issued a report substantiating several of the concerns.
Contractors taking part in reverse auctions needed only to “self certify” that they’re authorized distributors of official surgical products sought by VA, according to auditors. The lack of more stringent requirements put VA at risk of buying from unauthorized distributors, according to the report.
In a written response to the inspector general’s report this year, VA officials agreed with a recommendation to ensure against the purchase of gray market items.
• Jim McElhatton can be reached at email@example.com.
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