Dear Tribal Leader:

We would like to invite Tribal Leaders (or their designated representative) along with Tribal Health Program leadership to participate in a written tribal consultation regarding pharmacy reimbursement rates for the lower 48 state facilities participating in VA’s Indian Health Service/Tribal Health Program (IHS/THP) Reimbursement Agreement Program (RAP).

VA continues to seek improvements to VA’s IHS/THP RAP to enhance program operations. Currently, reimbursement agreements under this program state that VA will reimburse “actual; costs” for pharmaceuticals. In implementing this requirement, VA has realized that this term, “actual costs”, may be ambiguous and has led to difficulties in administering the agreements in compliance with applicable laws. VA is considering replacing the term “actual cost” with a more recognizable and easily calculated rate. Selecting an industry standard pharmaceutical rate structure would benefit IHS/THP sites by making it easier to understand and predict the reimbursement rate and by eliminating the need to calculate actual cost.

VA is proposing two distinct pharmacy payment rates for IHS and THP facilities. For IHS facilities, VA has collaborated with IHS to use the Federal Supply Schedule (FSS) or other contract vehicles (i.e. joint national drug contracts) pharmaceutical pricing, whichever is lower, as the proposed reimbursement rate, as the majority of their pharmaceuticals are purchased using the FSS contract or other contract vehicles. For those pharmaceuticals not available on the FSS, claims will be paid based on the adopted rate that is agreed upon with the THPs.

For THP facilities, VA is suggesting using one of two industry standard pharmacy reimbursement methodologies. These proposed methodologies are: (1) Wholesale Acquisition Cost (WAC) plus dispensing fee, and (2) Average Wholesale Price (AWP), minus discount, plus dispensing fee for the purpose of selecting a new pharmacy payment methodology for THPs. See Attachment 1 for a summary of each methodology.

VA is seeking stakeholder feedback on each of these methodologies and proposes the following questions:

(1) For the rates for THP facilities, what is your preferred pharmacy payment methodology; Wholesale Acquisition Cost (WAC) or Average Wholesale Price (AWP), plus dispensing fee?

(2) For the rates for THP facilities, if you identify Average Wholesale Price (AWP) as the preferred method, what would you propose as the AWP discount percent rate for generic drugs and name brand/specialty drugs? How did you calculate or determine the proposed discount percent rate?

(3) For THP dispensing fee, VA proposes to adopt an amount in the industry standard range, generally less than $1.00 per drug, to be applied to either selected rates (WAC or AWP). Do you agree with $1.00/drug dispensing fee? If not, what do you propose the dispensing fee should be? How did you calculate or determine the proposed dispensing fee?

(4) Do you have any comments on pharmacy reimbursement rates for IHS facilities and/or the related claims submission and reimbursement process?

Written comments may be submitted before July 5, 2021 by email to or by mail at Department of Veterans Affairs, Suite 915L, 810 Vermont Avenue, NW, Washington, DC 20420.

For questions, please contact VA IHS/THP RAP at Program information including templates, provider guides, and factsheets can be found on the VA Office of Community Care and the Office of Tribal Government Relations websites.

I appreciate your support as we move forward together to enhance and improve the care provided to our American Indian/Alaska Native Veterans.


/s/Elizabeth Brill, MD, MBA, FACOG
Acting Deputy to the Assistant Under Secretary for Health for Community Care

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Published on May. 29, 2021

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