Pilot Program for DOD Use of VA’s CMOP

During fiscal year 2003, DOD and VA conducted a pilot program to assess  the feasibility of dispensing outpatient refill prescriptions for DOD  beneficiaries using a VA CMOP. DOD Could Realize Financial Savings and Nonmonetary Benefits by Using VA’s CMOP

DOD could achieve savings by taking advantage of VA’s generally lower  drug prices if it used the VA CMOP to dispense its outpatient pharmacy  refill prescriptions. However, achieving savings would require closing MTF outpatient  pharmacy refill operations to offset CMOP administrative expenses. In  addition to demonstrating that financial savings are possible, the pilot  produced nonmonetary benefits such as providing high-quality service as  indicated by measurements of beneficiary satisfaction and rates of  accurate and timely distribution of drugs, reducing automobile traffic  congestion and pharmacy wait times, and freeing DOD resources for its  core mission of supporting military readiness. If the three MTFs  had been able to achieve the same savings per prescription and had fully  utilized the pilot for all their outpatient refill prescriptions in fiscal year  2003—including those dispensed through the CMOP and those dispensed  at the MTFs—drug cost savings during fiscal year 2003 could have been  about $1.5 million. Use of CMOP Provided Nonmonetary Benefits to DOD

The pilot also produced nonmonetary benefits. While DOD’s use of the  CMOP is a significant opportunity for DOD to achieve savings and expand  its sharing of resources with VA, there are other cost implications that  could become important if MTF refill operations were closed with the  expectation that beneficiaries would use the CMOP. Specifically, rather  than obtaining drugs from the CMOP, beneficiaries might choose instead  to obtain their drugs from a more costly option for DOD, such as retail  pharmacies. Any cost increases will challenge DOD to find more efficient  ways to manage its pharmacy benefits program, such as by encouraging  beneficiaries to choose the most cost-effective options for where they  obtain their drugs. VA concurred with our draft report. Although cost savings through the  CMOP are dependent on closing MTF outpatient pharmacy refill  operations, we noted in the draft report that MTFs could continue to  dispense outpatient refill prescriptions at MTF main pharmacies. Finally, DOD stated that we assumed that current options are more costly  for DOD than having beneficiaries obtain their drugs from the CMOP, and  that this was a subjective conclusion. And, as noted in the draft report, the CMOP’s drug costs and  administrative costs were lower than the drug and administrative costs for  DOD’s TRICARE Mail Order Pharmacy. Appendix I: Scope and Methodology

To address our objective, we compiled information on the operations of  the Department of Defense (DOD) and the Department of Veterans Affairs  (VA) Consolidated Mail Outpatient Pharmacy (CMOP) pilot program, and  we compared the costs of purchasing and dispensing drugs at the CMOP  that dispensed drugs for the pilot with the costs at the pilot military  treatment facilities (MTF). To compile information on the pilot program and on related aspects of  DOD’s and VA’s pharmacy programs, we conducted site visits, reviewed  program documentation, and interviewed DOD and VA officials  responsible for purchasing and dispensing drugs. To compare the administrative costs of dispensing refill prescriptions at  the CMOP with the costs at MTFs participating in the pilot, we collected  cost information from program officials and evaluated it to ensure that it  was comparable to the costs from the other sites.
Why GAO Did This Study

There has been long-standing congressional interest in whether the Department of Defense (DOD) could use the Department of Veterans Affairs (VA) Consolidated Mail Outpatient Pharmacy (CMOP) system as a cost-effective alternative to beneficiaries picking up outpatient refill prescriptions at DOD military treatment facilities (MTF). To evaluate this possibility, DOD and VA conducted a pilot program in fiscal year 2003 in which a VA CMOP provided outpatient pharmaceutical refill services to DOD beneficiaries served through three MTFs. GAO was asked to estimate cost savings that could be achieved if DOD used VA's CMOP instead of MTF pharmacies for outpatient refill prescriptions, and what other benefits were achieved at the three pilot sites. To estimate potential cost savings and determine what other benefits were achieved, GAO reviewed pilot and pharmacy program documentation and interviewed DOD and VA officials responsible for purchasing and dispensing drugs. GAO also compared drug and administrative costs of dispensing outpatient refills through the fiscal year 2003 pilot program with the costs of dispensing the refills at the three DOD MTFs that participated in the pilot.

What GAO Found

DOD could achieve savings if it used VA's CMOP to dispense its outpatient refill prescriptions by taking advantage of VA's generally lower drug prices. Based on the drugs dispensed through the pilot, GAO estimated that the three MTFs that participated in the CMOP pilot program in fiscal year 2003 could have saved about $1.39 per prescription in drug costs, or a total of about $1.5 million, if the MTFs moved all their refill prescriptions to the CMOP. However, while DOD saved money on drug costs at the pilot MTFs, these savings were offset because DOD paid administrative costs for refill operations twice--first to pay VA for the administrative costs charged by the CMOP and second to maintain outpatient pharmacy refill operations at the MTFs. Consequently, achieving savings would require closing MTF outpatient pharmacy refill operations to offset CMOP administrative expenses. In addition to demonstrating that financial savings are possible, the pilot produced nonmonetary benefits. MTF officials reported benefits such as reduced automobile traffic congestion and shorter pharmacy waiting times because many civilian beneficiaries at the pilot sites no longer came to MTFs to pick up refill prescriptions. Further, DOD beneficiaries who participated in the pilot program reported satisfaction with the CMOP's accurate and timely distribution of pharmaceuticals. There are other potential cost implications for DOD if it decides to close MTF outpatient refill pharmacies and move the workload to the VA CMOP. Because DOD beneficiaries are allowed to choose among various options for obtaining drugs, they would be able to obtain their drugs from retail pharmacies and DOD's mail order pharmacy instead of the CMOP. These options, however, are more costly for DOD than having beneficiaries obtain their drugs from the CMOP. Consequently, if DOD closes the outpatient refill pharmacies at the pilot sites with the expectation that beneficiaries would use the CMOP and they did not, DOD's costs could increase. Any cost increases will challenge DOD to find more efficient ways to manage its pharmacy benefits program, such as by encouraging beneficiaries to choose the most cost-effective options for where they obtain their drugs. We provided a draft of this report to VA and DOD for comment. VA said that it concurred with the draft report and DOD said that it was technically accurate but neither explicitly concurred nor nonconcurred.