Federal contracting expectations are changing, again. And this time, the implications for pharmaceutical manufacturers participating in VA and Federal Supply Schedule (FSS) contracting are significant.
On April 23, 2026, the Department of Veterans Affairs issued a class deviation implementing Executive Order 14398, introducing a new compliance requirement that directly impacts how manufacturers manage DEI policies, federal contracts, and downstream partner relationships.
For manufacturers with VA FSS contracts, this isn’t just a policy update. It’s a contractual obligation with a firm timeline and real risk of enforcement.
What Changed: The VA’s New DEI Compliance Requirement
Executive Order 14398 fundamentally shifts how Diversity, Equity, and Inclusion (DEI) is treated in federal contracting.
The core requirement is simple but far‑reaching: Federal agencies, including the VA, cannot contract with companies that engage in racially discriminatory DEI practices.
To implement this, the FAR Council introduced a new mandatory clause: FAR 52.222‑90 – “Addressing DEI Discrimination by Federal Contractors” (APR 2026)
This clause:
- Is mandatory for new federal contracts beginning April 2026
- Must be added to existing contracts through modification, with a target deadline of July 24, 2026
- Must be flowed down to subcontractors
- Applies to VA FSS pharmaceutical contracts
- Carries enforcement mechanisms, including termination, suspension, and debarment
For pharma manufacturers, this places VA contracting squarely at the intersection of policy interpretation, legal risk, and contract execution.
Why This Is Especially Risky for Pharma Manufacturers
Unlike many regulatory changes, this rule introduces legal ambiguity.
The regulation clearly defines what is prohibited, but it defines what is explicitly allowed far less clearly.
For manufacturers already operating complex federal portfolios, often layered with PBM relationships, Big 4 distributors, and third‑party service providers, this ambiguity creates an immediate challenge:
How do you quickly and consistently demonstrate compliance, defensibly, across every impacted contract?
The Real Pressure Point: Contract Modifications by July 2026
The VA has made its expectations clear:
- Contracting officers are required to modify existing contracts
- Contractors must be ready to review, approve, and execute bilateral modifications
- Refusal or delay can result in termination for convenience
- Subcontractor compliance is now your responsibility
This is where many manufacturers will struggle, not because they don’t intend to comply, but because:
- VA contracts are often managed outside core revenue systems
- Contract language, obligations, and approvals live in disconnected tools
- Policy changes trigger manual, high‑risk workflows
- There is limited auditability around what was approved, when, and by whom
In short, this is not just a policy problem; it’s a contract execution problem.
What Manufacturers Need to Do Now
Leading manufacturers are already taking a structured approach. At a minimum, organizations should consider the following best practices as part of their broader compliance and operational strategy:
Disclaimer: The approaches outlined below are intended as general industry considerations and not prescriptive requirements. Organizations should evaluate practices based on their individual risk profile, operational model, and applicable regulations. Formal processes, controls, and governance frameworks should be documented and maintained within the company SOPs, policies, and related compliance procedures.
- Identify Affected Contracts
- VA FSS pharmaceutical contracts
- Other federal agreements connected to VA, DoD, or CMS
- PBM or distributor agreements tied to federal frameworks
- Perform a DEI Policy Risk Review
- Hiring practices
- Supplier diversity programs
- Training initiatives
- Grants, sponsorships, and funding programs
- Coordinate Legal and Compliance Interpretation
- Define what constitutes “discriminatory DEI” risk for your organization
- Document defensible positions
- Prepare response language for contracting officers if questions arise
- Prepare for Contract Modifications
- Confirm authorized signatories
- Align internal approval workflows
- Ensure contract repositories reflect current obligations
5. Manage Subcontractor Flow‑Down
- Distributors
- 3PLs
- Service vendors
- Any third party touching federally contracted products
The Takeaway
The VA’s new DEI requirements are not theoretical—and they are not optional.
They represent:
- A meaningful shift in federal contracting expectations
- A fixed timeline for compliance
- Real enforcement consequences for manufacturers that fall behind
Pharmaceutical companies that act now by aligning Legal, Compliance, and Contract Operations and using systems designed to manage federal complexity will move through this transition with confidence.
Those who wait will find themselves racing against the clock. In today’s environment, compliant growth isn’t just about policy alignment. It’s about contract readiness.
Prepare Now—Before July 2026
The July 2026 VA contract modification deadline is approaching. Manufacturers that act early will move through compliance calmly. Those who wait will face compressed timelines and elevated risk.
Learn how iContracts RMS helps manufacturers manage VA contract updates, approvals, and audit readiness at scale.
Schedule a conversation to assess readiness and support rapid execution.
Katherine Johnson
Director, Government Pricing
