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Table of Contents

National Performance Review

Report on
Reinventing the Department of Defense
September 1996


  • Prime Vendor. Prime Vendor cuts red tape and puts customers first in the procurement of pharmaceutical and medical/surgical . Prime Vendor, an initiative jointly sponsored by the Assistant Secretary of Defense (Health Affairs) and the Deputy Under Secretary of Defense (Logistics), permits medical treatment facilities (MTFs) to order pharmaceutical and medical/surgical items directly from vendors using electronic commerce/electronic data interchange. Prior to Prime Vendor, the order and ship time for pharmaceutical and medical/surgical items, the prices paid for them, and the inventories of these items at both the wholesale level and MTFs were excessive. The process for ordering, receiving, and paying for these items was burdened with paper. Under Prime Vendor, a personal computer based system administered jointly by the Department of Defense Group Purchasing Organization, Defense Personnel Support Center (DPSC) and the Defense Medical Logistics Standard Support (DMLSS) Program Management Office (PMO), the MTF electronically orders items directly from the prime vendor, receives confirmation electronically, and receives the materials within 24 hours. An electronic invoice is then sent to the bill payer and funds are electronically transferred to the prime vendor's bank account. Transactions are paperless.

In support of Prime Vendor, DPSC negotiates Distribution and Pricing Agreements (DAPAs) with manufacturers of pharmaceutical and medical/surgical items. DAPAs establish prices to be paid for these items. DPSC then awards a single Prime Vendor pharmaceutical and Prime Vendor medical/surgical contract for each geographical region. The number and type of products stocked and distributed by each prime vendor are determined by demand factors from the MTFs and DAPAs.

For the past two years, Prime Vendor has been deployed to MTFs and other ordering sites world wide. When deployment is complete in fiscal year 1996, Prime Vendor will be deployed to 160 pharmacy and medical/surgical sites.

Benefits associated with implementation of Prime Vendor are substantial. For fiscal years 1991 - 1995, benefits attributable to Prime Vendor include: $382 million reduction in wholesale inventory, $71 million reduction in retail inventory, and $92 million reduction in the cost of drugs. Delivery took only 24 hours which resulted in a 95 percent level of availability for pharmaceutical and medical/surgical items at medical treatment facilities.