DOD Pharmacy Program: Continued Efforts Needed to Reduce Growth in Spending at Retail Pharmacies
Estimated to reach $15 billion by 2015, the Department of Defense's (DOD) prescription drug spending has been a growing concern for the federal government. The John Warner National Defense Authorization Act (NDAA) for Fiscal Year 2007 required GAO to examine DOD's pharmacy benefits program. Specifically, as discussed with the committees of jurisdiction, GAO examined DOD's prescription drug spending trends from fiscal years 2000 through 2006 and DOD's key efforts to limit its prescription drug spending. To conduct this work, GAO analyzed DOD's data on spending trends, including trends in beneficiary pharmacy use. GAO also assessed DOD's cost avoidance data and the agency's efforts to limit spending through its uniform formulary, which is a list of preferred drugs available to all beneficiaries. GAO interviewed DOD officials about these and other efforts to limit spending.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To help ensure the fiscal sustainability of DOD's pharmacy benefits program and complement more fundamental reforms recently enacted or recently proposed, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to monitor the effect of federal pricing arrangements for drugs dispensed at retail pharmacies along with ongoing efforts to limit pharmacy spending to determine the extent to which they reduce the growth in retail pharmacy costs. |
DOD's Pharmaceutical Operations Directorate awarded contracts to General Dynamics and Axiom to support DOD's staff in executing the tasks related to monitoring the effects of federal pricing for drugs dispensed at retail pharmacies and reconciliation of manufacturer refund payments. The contractors have tracked these refunds, and as of July 31, 2011, total collections for fiscal years 2009, 2010, and 2011 were $2.7 billion.
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| Department of Defense | To help ensure the fiscal sustainability of DOD's pharmacy benefits program and complement more fundamental reforms recently enacted or recently proposed, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to identify, implement, and monitor other efforts, as needed, to reduce the growth in retail pharmacy spending. |
DOD officials told us that beyond the mandatory retail refunds obtained under the federal pricing program, substantial additional cost avoidance have been realized as a result of the ongoing clinical and cost effectiveness evaluations of drugs and drug classes performed by the DOD Pharmacy and Therapeutics (P&T) Committee, with the support of the Pharmacoeconomic Center. The DOD P&T Committee has relied on the same formulary tools and commercial best practices--such as formulary status, prior authorization, "step therapy" programs, and quantity limits--used by other programs to encourage the use of evidence-based and cost-effective drug therapy. Also, in January 2010, DOD implemented an in-depth communications plan. DOD officials told us that this effort has resulted in the higher use of the less-expensive TRICARE Mail Order Pharmacy (TMOP) venue and savings to the government, which they estimate to be over $30 million. Additionally, DOD's Assistant Secretary of Defense for Health Affairs has approved an adjustment to the copayments for prescription drugs acquired at retail pharmacies and TMOP. For example, the new copayments for generic, formulary, and non-formulary prescriptions from retain network pharmacies are $5/$12/$25 compared to the old copayments of $3/$9/$22. This proposal intends to achieve savings for DOD by encouraging beneficiaries to acquire prescription drugs from MTF pharmacies and TMOP, which are more cost-effective for DOD than retail pharmacies.
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