Wonder Drugs Blow a $1 Billion Hole in VA’s Budget
Policy + Politics

Wonder Drugs Blow a $1 Billion Hole in VA’s Budget

REUTERS/Samantha Sais

A senior official at the Department of Veterans Affairs testified on Thursday that his agency is not rationing costly new drugs for veterans suffering from the potentially deadly Hepatitis C virus, as some have suspected, but acknowledged that the VA is reeling from the skyrocketing costs of providing the miracle drugs.

Deputy Secretary of Veterans Affairs Sloan D. Gibson told the House Committee on Veterans' Affairs that the agency had to scramble to shift $697 million earlier this year to cover the cost of the new drugs, including Salvaldi and Harvoni, and that the total cost for the fiscal year will be closer to $1.1 billion.

Related: Cash-Strapped VA May Start Rationing Some Treatments   

Rep. Jeff Miller (R-FL), chairman of the committee, pressed Gibson on whether some seriously ill veterans were being denied the new treatment, even as the VA continues to spend enormous sums on new hospital construction and fully funding an employee bonus pool. Sloan insisted that the VA was doing everything possible to provide the drugs for veterans who need them.

“We are not doing any rationing of care today,” Gibson said at the conclusion of a lengthy morning hearing into the agency’s widespread budget problems. “We don’t expect to do any rationing of care with Hepatitis C. The thing that’s allowing us to do that, frankly, is Choice.”

Gibson was referring to a new VA program approved by Congress last year that allows veterans to seek private care through the Medicare program if they have trouble arranging an appointment at a VA medical center within 30 days. Congress intervened last summer in the wake of stunning revelations that several dozen veterans died waiting for appointments at a medical center in Phoenix.

Related: Costly Hepatitis C Drug Makers Face New Fire 

Even with the appointment of a new secretary, Bob McDonald, a former corporate executive, long-standing management and budget problems persist at the VA. Lawmakers were stunned to learn recently that the department was facing an overall budget shortfall of $2.6 billion this year, due to both pent up demand for services and the cost of the Hepatitis C treatments.

VA officials have warned lawmakers in the past that the rising cost of Hepatitis C drugs was seriously draining their budget. Sen. Bernie Sanders (I-VT) first highlighted the problem during a hearing late last year when he headed the Senate Committee on Veterans Affairs.

Miller complained today that “at no point” in meetings and hearings with McDonald dating back to February had anyone warned him of the brewing budget crisis. He said the budget shortfall is of such magnitude that it “threatens VA’s ability to meets its obligations to our nation’s veterans.”

Related: The Life-Saving Drug That Almost No State Can Afford    

Miller and other lawmakers said they were troubled by reports that the VA was on the verge of denying the new drugs – which can cost as much as $1,000 a pill – to some patients out of concern about blowing an even larger hole in the VA’s fiscal 2015 budget.

The New York Times reported this week that an internal VA proposal to address the shortage of funds by excluding certain patients who have advanced terminal diseases or suffer from a “persistent vegetative state or advanced dementia” is stirring debate inside the department.

Rep. Doug Lamborn (R-CO) said he was concerned that VA policy makers were making ill-conceived tradeoffs by forging ahead with new hospital construction while shortchanging funding for drugs and operating costs.

For example, a $1.7 billion VA hospital project in Aurora, Colo., is one of several VA hospital projects that are far behind schedule and greatly over budget, according to the Government Accountability Office.

Related: Medicare’s Budget Busting $4.5 Billion for Hep-C Drugs 

Miller, meanwhile, said VA officials should give serious thought to reallocating $360 million currently budgeted for merit bonuses for VA employees to help to cover the mounting cost of the new specialty drugs.

“I don’t want to hear anybody say we choose bureaucrat bonuses over veteran health care,” he told Gibson.

“I understand the point, yes sir,” Gibson responded.

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