Among the health care services, the pharmacy benefit is most in demand by military beneficiaries. Accordingly, DOD has taken steps to improve pharmacy program management. 105-85), required us to review DOD’s pharmacy programs, focusing on (1) the adequacy of the information that DOD and its contractors have to manage the pharmacy benefit; (2) the merits and feasibility of DOD and its contractors applying commercial best practices, including a uniform formulary, in managing DOD’s pharmacy programs; (3) the merits and limitations of recent mail-order and retail pharmacy initiatives to secure discounted DOD drug prices; and (4) the potential effects MTF funding and formulary management decisions can have on beneficiaries’ access to pharmacies and TRICARE contractors’ costs. Drugs are chosen for a formulary on the basis of medical value and price. The consequences of not using these commercial best practices more extensively in DOD pharmacy programs are likely significant. Nonetheless, DOD and its contractors lack adequate prescription drug cost and use information as well as integrated pharmacy patient databases needed to effectively manage beneficiaries’ pharmaceutical benefits. Because of such problems as well as formularies that differ among its pharmacy programs, DOD is unable to fully apply proven PBM practices that could save hundreds of millions of dollars each year. The recent DOD mail-order program and retail pharmacy initiative, aimed at achieving savings by using DAPA prices, could cause financial and other problems for TRICARE contractors because pharmacy care would be separated from the contractors’ management of medical care. Also, efforts to cut MTF costs by dropping some prescription drugs from formularies could reduce beneficiaries’ MTF pharmacy access and increase other MTFs’ and potentially the TRICARE contractors’ pharmacy costs. Such efforts can be particularly hard financially on retirees aged 65 and older who have no outpatient prescription drug coverage under Medicare or any plan. In our view, the problems DOD is experiencing delivering its pharmacy benefit stem largely from the way it manages its $1.3 billion pharmacy programs. Also, DOD must commit itself to managing pharmacy programs as a system and bringing needed reforms to the system. Otherwise, DOD’s pharmacy problems will continue and likely worsen in the future.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) pharmacy programs, focusing on the: (1) adequacy of the information that DOD and its contractors have to manage the pharmacy benefit; (2) merits and feasibility of DOD and its contractors applying commercial best practices, including a uniform formulary, in managing its pharmacy programs; (3) merits and limitations of recent mail-order and retail pharmacy initiatives to secure discounted DOD drug prices; and (4) potential effects the military treatment facilities' (MTF) funding and formulary management decisions can have on beneficiaries' access to pharmacies and TRICARE contractors' costs.

What GAO Found

GAO noted that: (1) despite ongoing efforts to improve its pharmacy benefit programs, DOD and its contractors lack basic prescription drug cost and beneficiary use information as well as integrated pharmacy patient databases needed to effectively manage military beneficiaries' pharmaceutical care; (2) because of these problems, as well as formularies that differ among its pharmacy programs, DOD is unable to fully apply proven pharmacy benefit manager commercial best practices that could save millions of dollars each year; (3) recent DOD mail-order and retail pharmacy initiatives aimed at achieving savings by using distribution and pricing agreement drug prices could cause financial and other problems for TRICARE contractors because pharmacy care would be separated from the contractors' management of medical care; (4) moreover, MTFs' efforts to hold down costs by restricting the prescription drugs available on formularies could reduce beneficiaries' access to certain prescription drugs at MTF pharmacies and allegedly has increased TRICARE contractors' pharmacy costs; (5) such efforts can be particularly hard financially on retirees over age 64 with no prescription drug coverage under Medicare or any plan; (6) the significant problems DOD is experiencing in delivering its pharmacy benefit result largely from the way DOD manages its three pharmacy programs; (7) rather than viewing the programs as integral parts of a single pharmacy system, DOD manages the programs as separate entities, not taking into account, for example, the merits of establishing a uniform DOD formulary and integrated databases, or the effects that new initiatives, such as implementing a separate mail service pharmacy program, will have on the other programs; and (8) unless DOD begins to manage the various components of the pharmacy programs as a single system, the problems identified will continue and potentially worsen in the future.