TRICARE’s pharmacy contract is supposed to ensure that negotiated savings reach the government. Federal audits of Express Scripts’ work for other health plans raise doubts about whether contract language alone is enough.
Building off of testimony given before the U.S. Senate in July, APCI’s latest Insights report, TRICARE Pharmacy Program: Pass-Through in Name Only?, calls on Congress to order a comprehensive audit of the program. At issue are discounts, rebates, and fees negotiated across Express Scripts’ business that may never appear on an individual TRICARE prescription claim.
What the Federal Audits Found
The Office of Personnel Management’s inspector general identified more than $56 million in discounts, rebates, and fees that Express Scripts or its affiliates failed to pass through to two federal employee health plans. The audits covered pharmacy operations for the American Postal Workers Union and Compass Rose health plans.
Express Scripts disputed the auditors’ interpretation of its obligations, arguing in part that certain payments were unrelated to individual prescriptions. Auditors rejected that reasoning.
The distinction is central to APCI’s concerns about TRICARE. A pharmacy benefit manager (PBM) can negotiate discounts based on the combined business of multiple plans, then account for those discounts separately from the prescriptions that helped generate them. Reviewing claims alone may not show whether each plan received its share.
According to the APCI report, Express Scripts has stated in litigation that it negotiates a single network agreement with each retail pharmacy and administers those services across federal and nonfederal plans on an undivided basis. That makes its handling of the federal employee plans relevant to a TRICARE review.
It does not establish that TRICARE suffered the same losses. Determining whether it did is the purpose of the audit APCI is requesting.
The Case for Mail Order Needs Scrutiny
The report also examines the costs behind policies that favor Express Scripts’ mail-order pharmacy.
Department of Defense data indicated that the department paid more, on average, for a 30-day supply of generic medication through mail order than through retail pharmacies in every year with available data from fiscal 2017 through fiscal 2022. The difference reached 85%. Relevant fiscal 2021 figures were unavailable.
Those averages do not settle the cost comparison for every drug. They do warrant a closer look at claims that shifting prescriptions to mail order saves the government money.
The consequences of retail network decisions are already documented. A Government Accountability Office review found that about 380,000 beneficiaries may have needed to find another pharmacy after the October 2022 network reduction.
APCI wants an audit to examine the basis for that reduction, along with mail-order dispensing costs and how Express Scripts calculates and accounts for beneficiary copays.
Congress Has a Role Beyond the Audit
An audit would help determine whether TRICARE receives the savings it is owed. APCI also recommends legislation to protect beneficiaries’ pharmacy choice and reform how pharmacies are paid.
The report calls for ending mandatory mail order for brand-name maintenance medications and eliminating copay disparities that favor mail order. It recommends reimbursement standards based on National Average Drug Acquisition Cost, full rebate pass-through, a prohibition on patient steering, and limits on payment clawbacks after prescriptions have been dispensed.
APCI also calls for future TRICARE contracts to prohibit the PBM administering the benefit from owning or being affiliated with mail-order or specialty pharmacies, and for Congress to put that restriction into law.
The conflict is straightforward: Express Scripts manages the retail network while owning a pharmacy that competes for those prescriptions. Congress should require a full accounting of those decisions and change the policies that give the contractor’s pharmacy an advantage.
Read the full report: bit.ly/apci-insights-011