TRICARE is coming under fire for its decision to renew a multibillion-dollar contract to Express Scripts to manage the U.S. military’s health care program’s pharmacy benefits.
Independent pharmacies said they’ve had to leave the program over unsustainably low reimbursement rates, while changes to the program have required some beneficiaries to receive certain medications directly through Express Scripts’ mail-order pharmacy.
The arrangement has prompted questions from lawmakers about beneficiary access to care and potentially anti-competitive practices by Express Scripts, the second-largest pharmacy benefit manager in the nation.
“I have serious concerns about how the situation looks,” Rep. Andy Biggs, R-Ariz., said in July during a House Oversight Committee hearing with executives of the three largest PBMs. “What is the justification for limiting choice in access to medication for service members?”
TRICARE, the U.S. military’s health care program, provides health care coverage to 9.6 million active duty service members, their families, National Guard and Reserve members, and military retirees. Express Scripts has managed pharmacy benefits for TRICARE since 2009 and signed an eight-year contract in 2021 worth up to $4.3 billion, with an option renewed earlier this year.
Controversy over the TRICARE pharmacy network blew up in 2022 after the new contract signed by Express Scripts, at its request, only required 35,000 pharmacies to be in-network — a reduction of 15,000 from the previous requirement. Those cuts were targeted to independent pharmacies.
Now, a few years later, independent pharmacies continue to leave the network.
“People want nothing more than to serve these patients,” Brian Hose, chief executive officer of EPIC Rx, a pharmacy services administrative organization that represented 1,100 independent pharmacies in negotiations with Express Scripts for TRICARE.
Hose said Express Scripts recently ended negotiations with the organization after it continued pushing for changes to the proposed reimbursement rates, which he said were below the cost of procuring and dispensing medications.
“They [independent pharmacies] want to be able to provide medicines to these communities. And it was challenging to walk away from TRICARE, but it was also pretty clear from how bad the contract was that reimbursement wasn’t sustainable,” Hose said. “At some point, you can’t send every prescription out the door with a five-dollar bill attached to it.”
A spokesperson with the Defense Health Agency said 42,000 pharmacies are in the TRICARE network, including 13,900 independent pharmacies.
Reimbursement rates
When a PBM can’t reach an agreement with a pharmacy services administrative organization, it often sends out contracts to the individual pharmacies that were represented by those organizations.
In some states, like New York, pharmacies have to opt out of those contracts, called “passive contracts” or they’re locked in.
It is a practice mentioned in the Federal Trade Commission report on PBMs released last month.
“These passive contracts can make up a large percentage of contracts sent out by PBMs, often to independents and smaller chains,” the report stated. “Mass notifications, including through communications using facsimile machines, called ‘fax blasts,’ typically automatically enroll the pharmacy into new terms and conditions.”
And some pharmacy owners say those offers are typically worse than what was offered to the pharmacy services administrative organization. Express Scripts doesn’t really negotiate, said Steve Moore, owner of Condo Pharmacy in Plattsburgh, New York, where nearly 8 percent of the population are veterans.
“Every attempt to negotiate with ESI is met with the same canned response about ‘best and final’ rates,” he wrote in his response to one of the company’s offers. “I am incredibly disappointed in how ESI has handled this ‘negotiation’ and it is ultimately our patients who will lose out.”
Condo Pharmacy will be out of network with TRICARE beginning later this month, a decision Moore said was painful.
“It’s been a privilege to be able to take care of the patients and to serve them and their families,” he said. “To not be able to continue to do so is just not a not a great feeling, and certainly not a professional highlight, that’s for sure.”
Congressional scrutiny
Congress has scrutinized PBMs for several years and is considering legislation that would prohibit them from charging health plans different amounts than they reimburse pharmacies and require transparency disclosures, among other things (S 1339), (S 127) and (HR 2880).
While none of that legislation specifically addresses PBM business practices in TRICARE, members have sought to get more answers about what is going on.
A provision in the House’s version of the fiscal 2025 National Defense Authorization Act (HR 8070) would require the Defense Department to issue a report to Congress evaluating beneficiary access to pharmacies, particularly in rural areas, under the current contract versus the previous contract no later than 180 days after enactment.
“There has to be more transparency on this issue,” said Karen Ruedisueli, director of government relations for health affairs at the Military Officers Association of America. “That reduction has been problematic, especially for people in rural areas. Because most of the pharmacies that left were independent, and rural areas are heavily dependent on independent pharmacies.”
During the July House Oversight Committee hearing, Adam Kautzner, president of Evernorth Care Management and Express Scripts, defended the company’s management of the TRICARE pharmacy network, arguing that it exceeds the access standards set by TRICARE, including a requirement that 98 percent of patients that are TRICARE beneficiaries live within 15 minutes of a pharmacy.
A Defense Health Agency spokesperson said the agency monitors pharmacy network access standards monthly and that Express Scripts “continues to exceed the contract requirements for network access and number of pharmacies.”
After blowback from members of Congress and the public, Express Scripts reopened its network for interested independent pharmacies.
“All independent pharmacies had the opportunity to continue to participate in the network and they made a decision not to,” Kautzner said.
Home delivery
A recent move also requires all beneficiaries — except active duty — who take certain medications receive them through a military pharmacy or a home delivery service owned by Express Scripts.
Some specialty drugs — drugs that treat complex issues like cancer — must either be filled through home delivery or through Kroger, Rite Aid, Walgreens or Walmart.
After two fills at a retail pharmacy, members are told they’ll have to pay full price for prescription.
That’s exactly what happened for a cancer patient at Texas Oncology in Fort Worth, Texas, said David Serna, pharmacy manager for the organization.
A 71-year-old with stage 4 breast cancer had been receiving oral chemotherapy pills from the in-house pharmacy for nearly a year.
“All of a sudden they were pulling the rug out from under her,” Serna said. “She felt that it was her care and how is she not able to decide where she gets her medication from?”
It makes it more difficult to keep track of a patient’s care and whether they are adhering to medication, he said — something that’s particularly important for cancer care.
The drug — Piqray — was one of the specialty drugs Express Scripts announced would need to be filled through the company’s specialty pharmacy, Accredo, beginning earlier this year.
The Defense Health Agency has said increasing use of home delivery helps keeps costs lower.
But lawmakers have expressed concerns that such program design amounts to “steering.”
“Since the (Defense Health Agency) granted Express Scripts its exclusive TRICARE contract in 2009, the company has consistently leveraged its market power to squeeze independent pharmacies and steer TRICARE beneficiaries to their own mail-order pharmacy,” Twenty-four members of Congress and senators, led by Sen. Elizabeth Warren, D-Mass., wrote in a June letter to Lester Martinez-Lopez, the Defense Department’s assistant secretary of defense for health affairs.
The members have not received a response to a list of questions in the letter, which came with a July 2 deadline.
Express Script’s Kautzner has refuted characterizations that the company “steers” beneficiaries to pharmacies owned by the company, stating that “we carry out the benefit as directed by TRICARE.”
“TRICARE makes the decision on whether they want to prefer a pharmacy or not,” he said. “So in this instance, TRICARE does have our home delivery pharmacy as an option as a preferred pharmacy.”
Eileen Huck, government relations senior deputy director for the National Military Family Association, said she has heard similar responses when bringing concerns to the Defense Health Agency or Express Scripts.
“It should not just be about the number of pharmacies in the network. It has to be about whether the composition of pharmacies is able to meet the needs of beneficiaries,” Huck said. “It’s the people in remote locations — people who require specialty drugs relying on independent pharmacies. Those are the people who have been negatively impacted.”
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