Defense Health Care:

Need for Top-to-Bottom Redesign of Pharmacy Programs

T-HEHS-99-75: Published: Mar 10, 1999. Publicly Released: Mar 10, 1999.

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Stephen P. Backhus
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Pursuant to a congressional request, GAO discussed the Department of Defense's (DOD) $1.3 billion pharmacy programs and efforts under way to redesign DOD's pharmacy benefit.

GAO noted that: (1) the significant problems DOD is experiencing delivering its pharmacy benefit result largely from the way DOD manages its three pharmacy programs; (2) rather than viewing the programs as integral parts of a single pharmacy system, DOD manages the programs as separate entities; (3) unless DOD begins to manage the various components of the pharmacy programs as a single system, the problems GAO identified will continue and potentially worsen; (4) 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; (5) without cost and use information and integrated databases, coupled with formularies that differ among its pharmacy programs, DOD is unable to apply proven pharmacy benefit management commercial best practices that could save hundreds of millions of dollars each year; (6) last year's DOD mail-order and retail pharmacy initiatives aimed at achieving savings by using discounted DOD drug prices could cause financial and patient safety problems for TRICARE contractors because these initiatives divorce contractors' medical care management from their pharmaceutical care, and this integration is important in maintaining the beneficiary population's good health; (7) military treatment facilities' efforts to hold down costs by restricting the drugs available on formularies could reduce beneficiaries' access to prescription drugs and according to contractors has increased their retail pharmacy costs; (8) such efforts can be particularly hard financially on retirees aged 65 and over, who have no prescription drug coverage under Medicare; (9) DOD is seeking to acquire the technology that will enable it to integrate its pharmacy databases by March 2000; (10) as mandated by the fiscal year 1999 Strom Thurmond National Defense Authorization Act, DOD is developing a plan for redesigning its pharmacy programs and initiating a two-site pharmacy redesign program for Medicare-eligible beneficiaries; and (11) GAO has not yet been given a copy or access to this plan and thus cannot comment on it.

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