TPHARM

NEW TRICARE PHARMACY CONTRACT COMBINES THE BEST OF BOTH WORLDS.

The TRICARE Management Activity (TMA) at the Department of Defense plans to combine operations of both the TRICARE Mail Order Pharmacy (TMOP) and its retail pharmacy (TRRx) under a single contract, known as the TRICARE Pharmacy (TPharm) contract, to be awarded later this year.

Today, Express Scripts Inc. of St. Louis, Mo., manages two separate contracts—one for TMOP and one for TRRx. DoD awarded the original contract for TMOP to Medco Health Solutions Inc., based in Franklin Lakes, N.J., but Express Scripts won that contract when it was up for renewal in 2002. Express Scripts won the TRRx contract in a separate competition in 2003.

The primary goal of combining the contracts is to save costs on the contracts for DoD, according to U.S. Public Health Service Captain Thomas J. McGinnis, chief pharmacy officer in the Office of the Assistant Secretary of Defense for Health Affairs.

“The main thing this contract will do is save us a lot of money by streamlining processes and having one company handling the contract. So that is the major issue there,” McGinnis told Military Medical Technology.

But because DoD saves money, TRICARE beneficiaries also could save money, McGinnis stressed.

“We will be able to tack on a few other things into that contract, like utilization management to give patients an incentive to go to our cheapest cost centers, and that’s the mail-order pharmacy, not the retail pharmacy,” McGinnis explained. “The mail-order pharmacy is under-utilized, and that’s why you are going to see a lot of things coming out of our office here to encourage patients to use the mail-order pharmacy.”

Currently, a TRICARE beneficiary can receive a 30-day supply of brand-name pharmaceuticals through a retail pharmacy for $9. The beneficiary can receive a 90-day supply through the mail-order pharmacy at the same cost, however.

“It’s a 66 percent savings,” McGinnis noted. “We can do that because DoD gets a much better price on medications that are given through the mail-order pharmacy than we do at the retail-pharmacy level. And generic drugs are even cheaper; they are only $3 at both the mail order and retail pharmacy, but, again, you get a 90-day supply at the mail-order pharmacy.”

In addition to mail-order and retail pharmacies, patients can receive their prescriptions from military medical treatment facilities. But with warfighters returning to the United States for treatment after tours in Afghanistan and Iraq, many of the medical treatment facilities have become overwhelmed, resulting in long waits for filling prescriptions.

With the new contract award, DoD hopes to bring some balance to the overutilized medical treatment facilities and the under-utilized mail-order pharmacy, McGinnis said.

“We are urging those beneficiaries that are on maintenance medications, medications that you are going to be taking for a long time or perhaps forever, to use the mail-order pharmacy,” he reported. In a proposed change in co-pays, “we would like to make the generic drug available for free from the mail-order pharmacy, just like the medical treatment facility, as a way to encourage those beneficiaries on maintenance medications to not use the medical treatment facility for their refills but to get those refills from the mail-order pharmacy.”

“This TRICARE pharmacy contract is in support of the TMOP and TRRx programs through which a pharmacy benefits manager (PBM) will provide the TMOP (including specialty pharmacy) services, provide a TRICARE retail pharmacy network, and perform as a fiscal intermediary on behalf of DoD to pay for all authorized pharmaceuticals and supplies for eligible beneficiaries,” according to the TPharm solicitation “mail order (including specialty pharmacy) services will be implemented on February 1, 2008, and retail pharmacy services on June 1, 2008. The TMOP and TRRx programs supported by TPharm are open to all eligible.”

The base period of the contract actually extends through Jan. 31, 2008, followed by six option periods for providing services through July 31, 2013.

A contract award could come as soon as fall of 2006, McGinnis estimated.

PHARMACY BENEFIT MANAGERS

Express Scripts, Medco and Caremark Rx are generally considered the top three PBMs in the nation, but of them, only Express Scripts is known to be in competition for the TPharm contract.

Other potential competitors at press time included several health care program managers—such as Humana Military Healthcare Services of Louisville, Ky.; Integrated Healthcare Services of Herndon, Va.; Medical Matrix of Ft. Worth, Texas; and WebMD Business Services of New York.

Several large integrators not necessarily best known for their health care programs—including EDS Corp. and Accenture—also had shown interest in the competition.

All of the companies competing for the TPharm contract declined to be interviewed for this article.

Express Scripts noted in its 2004 annual report (the most recent one available) that its PBM revenues had increased significantly since winning the contracts.

“The $27.9 million, or 38.2 percent, increase in PBM service revenues in 2004 as compared to 2003 is primarily due to the implementation of the TRICARE program in June 2004,” according to the report. The report also noted that servicing the TMOP contract required the construction of a new mail-order pharmacy facility in Tempe, Ariz.

DoD has praised Express Scripts’ management of its TRICARE contracts. On August 29, 2005, DoD announced that Express Scripts had saved the department more than $100 million by beating the prescription drug price guarantees from June 2004 to May 2005 under the TRRx contract.

“Serving the men and women of our nation’s armed forces is especially gratifying as we make the use of prescription drugs safer and much more affordable. Being recognized while doing so is a special honor,” said George Paz, Express Scripts chief executive officer.

Competitors for the TPharm contract are required to provide extensive pricing data, and a narrative of their experience in providing pharmacy-benefit-management services. The narrative could detail the experiences of the prime contractor or its first-tier subcontractors. An offerer had the option of providing past performance information not directly related to its performance as a PBM, but the company would have had to explain the reasons why such information was relevant.

McGinnis cautioned that the TRICARE contractors do not set the prices for individual drugs available through any of its pharmacy contracts.

“We also want to be able to get the best prices that we can for our beneficiaries,” McGinnis explained. “That is done through the pharmacy and therapeutics process, where they look at drug classes, rank those drugs in regard to safety and efficacy, and then solicit bids to be the core formulary drug or extend formulary or even rank them as non-formulary, based on the safety and efficacy profile and the price that manufacturers come back with in the bidding process.”

Drugs that become standards in the core formulary, essentially the list of permissible drugs fully available at regular cost to TRICARE beneficiaries, do so generally because their prices are very competitive, McGinnis noted.

“These prices that manufacturers are coming back with in the bidding process are better than the general supply schedule prices that we generally buy at,” he said. “So we get a good deal through that process and the beneficiaries get an even better deal when they go through the mail-order pharmacy. DoD saves money, too, through that process.”

BENEFITS TO THE WARFIGHTER

In the TPharm solicitation, DoD estimated that 9.2 million beneficiaries are presently eligible for TRICARE services. TMA also provided statistics revealing the use of TRICARE pharmacy services in the last six months of fiscal 2005. According to those statistics, an average of 1.46 million beneficiaries filled prescriptions through the TRICARE retail pharmacy network in each month, while an average of 229,000 beneficiaries filled prescriptions through the mail-order pharmacy each month.

Overall in fiscal 2005, beneficiaries ordered 48.9 million prescriptions from the retail pharmacy operation and 6.7 million from the mail-order pharmacy. In addition, TMA notes on its Web site that DoD has a health care budget of $38 billion in fiscal 2006 which marks a 100 percent increase from the health care budget in fiscal 2001. It further estimates that the budget will grow to $64 billion by fiscal 2015.

In addition, TRICARE presently receives support from a network of more than 220,000 doctors, 55,000 retail pharmacies and all U.S. hospitals, according to TMA. Eligible beneficiaries are able to access their TRICARE benefits through verification of their enrollment in the Defense Enrollment Eligibility Reporting System.

With regard to filling prescriptions, the separate TRRx and TMOP contracts already work together flawlessly through a shared database to provide services to beneficiaries, McGinnis stressed, so the same is expected under the TPharm contract.

“We try to make the process from the central pharmacy operations here at TRICARE seamless, meaning that the same thing occurs whether you go to the medical treatment facility, whether you go to the retail pharmacy, or whether you go to the mail-order pharmacy,” McGinnis said. “A patient presents a prescription, or, in the mail-order case, they mail that prescription to the mail-order operation. Then a pharmacist, whether at the medical treatment facility, the retail pharmacy or the mailorder pharmacy, enters that information into the computer system that goes into the central database.”

The central database operates out of a pharmacy operations facility in San Antonio, Texas, McGinnis added. The software can produce a profile of a patient on demand, listing the drugs that patient has received from any DoD facility. First DataBank, headquartered in San Bruno, Calif., provides software that informs pharmacists of possible adverse events that a patient may suffer under certain combinations of drugs.

“It looks at the drugs that the patient is on and looks at the new drug that the pharmacist is entering, and, if there is any possibility of an adverse event, it sends an electronic message back to that pharmacist to query the doctor to see if they really want this medication because of the possible interaction with something else that they may still be on,” McGinnis said. “So it’s good triggering software to start discussions with the patient to see if they are still on that medication or sometimes to go back to the doctor.”

A pharmacist can then call the prescribing doctor to confirm the order, and occasionally the doctor will become aware of information that a patient did not provide. The doctor could then correct the order in response to the pharmacist’s inquiry, which was prompted by the First DataBank software.

The TPharm contract will make use of that same system, which has proven very effective in preventing adverse effects among TRICARE beneficiaries, McGinnis said. The database system also should make beneficiaries comfortable with the mailorder pharmacy, which ultimately relies on the same computer system as the retail pharmacy.

“These mail-order pharmacies are statelicensed pharmacies just like the corner drugstore. They verify your order for medication, and all transactions go against the DoD database to make sure that there are not going to be any drug interactions with other medications that the patient is on,” McGinnis said. “Whether they got it from a military medical treatment facility or retail pharmacy or mail-order pharmacy, all of those transactions go into the same database.” ♦

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