Tricare Pharmacy Pilot: Improved Monitoring Needed with Expansion of Pilot Requirements
Published: 2015-09-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: DOD offers a pharmacy benefit to TRICARE beneficiaries who may obtain prescriptions from TRICARE's mail-order program, MTF pharmacies, or retail pharmacies. In 2013, the DOD Inspector General reported it was more cost efficient to fill prescriptions through mail order than retail pharmacies. To reduce costs, the National Defense Authorization Act (NDAA) for Fiscal Year 2013 required DOD to implement a pilot for certain TRICARE beneficiaries to obtain covered brand maintenance medications through mail order or MTF pharmacies. Under NDAA 2015, the pilot terminates at the end of fiscal year 2015, after which the pilot requirements are to be expanded to all eligible TRICARE beneficiaries.
The NDAA 2015 included a provision for GAO to examine the pilot. This report examines the extent to which DOD has (1) monitored whether covered brand maintenance medications were available, and prescriptions were filled on time and accurately, (2) monitored the satisfaction of participating beneficiaries, (3) achieved expected cost savings, and (4) prepared for the expansion. GAO reviewed and analyzed pilot performance and beneficiary satisfaction data, and cost savings estimates, and interviewed DOD officials and other stakeholders.
section_title: What GAO Found
paragraphs: For covered brand maintenance medications—those medications that are taken on a regular and recurring basis—the Department of Defense (DOD) has not fully monitored availability or the timeliness and accuracy of prescriptions filled for the TRICARE for Life Pharmacy Pilot. Specifically, GAO found that for the
mail-order program: DOD has monitored the availability of medications. It has also established and monitored performance standards on the timeliness and accuracy of prescriptions filled through mail order for all of TRICARE, but has not separately monitored performance through mail order for the pilot.
military-treatment-facility (MTF) pharmacies: DOD has not established or systematically monitored performance standards for the pilot on the availability of covered medications, or the timeliness and accuracy of prescriptions filled across MTF pharmacies.
Federal internal control standards suggest that agencies establish and review performance standards and monitor performance data to assess the quality of performance over time. Without fully monitoring the pilot's performance, DOD does not know whether it is working as intended, information that would be beneficial given the upcoming expansion of its requirements to all eligible TRICARE beneficiaries.
DOD has not monitored the extent to which beneficiaries were satisfied with the transfer of prescriptions to mail order or MTF pharmacies for the pilot. DOD officials said they relied on the results from a quarterly survey of TRICARE mail-order users to assess the satisfaction of pilot beneficiaries. However, other DOD officials who monitor the survey data said they do not know how representative the respondents are of pilot beneficiaries making the use of these data for this purpose questionable. Moreover, DOD has not monitored satisfaction of pilot beneficiaries across MTF pharmacies. Federal internal control standards require agencies to obtain information from external stakeholders to assess if they are achieving their goals, and to monitor and assess the quality of performance over time to ensure that issues are resolved. Without this stakeholder input, DOD lacks important information as to whether pilot beneficiaries faced any difficulties, including with obtaining their medications.
DOD appears to have achieved its expected cost savings based on estimates GAO reviewed. For the first year of the pilot, DOD's estimated cost savings were approximately $123 million based on the prescriptions for covered medications filled through mail order. This was comparable to DOD's projected cost savings of $120 million, an estimate that DOD developed prior to the start of the pilot.
DOD has issued regulations, but not finalized planning documents for the expansion of the pilot requirements. Officials said that they are in the process of developing planning documents, which will generally model those that were developed for the pilot. Given the limited monitoring conducted during the pilot, as it finalizes its planning documents for the expansion of the pilot to all eligible TRICARE beneficiaries, DOD would benefit from developing a robust monitoring process of affected beneficiaries, including the availability of medications, the timeliness and accuracy of prescriptions filled, and beneficiary satisfaction.
section_title: What GAO Recommends
paragraphs: GAO recommends that DOD develop a monitoring plan as part of its expansion planning documents. DOD concurred with GAO's recommendation.

section_title: Letter
paragraphs: The Department of Defense’s (DOD) military health system offered  comprehensive health care coverage—including a pharmacy benefit—to  an estimated 9.5 million eligible beneficiaries through its TRICARE  program in fiscal year 2015. TRICARE beneficiaries may obtain  prescription medications from: (1) military-treatment-facility (MTF)  pharmacies operated by DOD; (2) TRICARE’s mail-order pharmacy  program; or (3) network or nonnetwork retail pharmacies. We previously  reported that pharmacy benefit costs have been one of the fastest  growing cost areas within the military health system and that retail  prescription spending drove most of the growth, comprising 63 percent of  overall prescription drug spending from fiscal years 2000 through 2006.  We also reported that retail prescription spending remained over half of  DOD’s overall prescription drug spending in fiscal year 2011.
Department of Defense, Office of Inspector General, The TRICARE Mail Order Pharmacy  Program Was Cost Efficient and Adequate Dispensing Controls Were in Place, DODIG- 2013-108 (Alexandria, Va: July 2013). prescriptions (those taken on a regular and recurring basis) filled through  mail-order pharmacies than for those filled through retail pharmacies.  DOD also encourages beneficiaries to fill prescriptions through MTF  pharmacies as another lower-cost option for the government. Moreover,  beneficiaries have lower copayments when filling brand maintenance  medications through mail order than at retail pharmacies and have no  copayments when filling prescriptions for these medications at MTF  pharmacies.
National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239, § 716,   126 Stat. 1632, 1804 (Jan. 2, 2013). Covered medications include those prescribed for a  chronic, long-term condition taken on a regular recurring basis and that DOD selected to  include as part of the pilot. See www.health.mil/TFLDrugList for those medications  covered for the pilot.
Life beneficiaries at a cost of $2.2 billion, according to DOD. In the  implementing regulations for the pilot, DOD reported that it expected the  shift from retail pharmacies to mail order or MTF pharmacies would save  the department approximately $120 million during the first year. The  pilot began in February 2014 and terminates at the end of fiscal year  2015, after which the requirements that were for the pilot are to be  expanded to all eligible TRICARE beneficiaries pursuant to the NDAA for  Fiscal Year 2015.
The NDAA for Fiscal Year 2015 included a provision for GAO to examine  the pilot. This report examines the extent to which DOD has (1)  monitored whether covered medications were available and prescriptions  were filled on time and accurately for the pilot, (2) monitored the  satisfaction of participating beneficiaries, (3) achieved its expected cost  savings for the first year of the pilot, and (4) prepared for the expansion of  the pilot requirements to all eligible TRICARE beneficiaries.
To determine the extent to which DOD has monitored whether covered  medications were available and prescriptions were filled on time and  accurately for the pilot, we examined the performance data that Express  Scripts, Inc. (ESI)—the pharmacy benefits manager that DOD contracts  with to manage its network of retail pharmacies and its mail-order  program—reports to DOD for all prescriptions filled through mail order.  The data included the extent to which medications were out of stock, and  the timeliness and accuracy of prescriptions filled. We also requested this  performance data from DOD and ESI specific to the pilot for covered  medications for the first year of the pilot from February 2014 through  February 2015. We compared ESI’s performance data for the pilot to  the performance standards ESI was expected to meet in its contract with  DOD for the mail-order program. In addition, we requested performance  standards and data from DOD specific to the pilot for MTF pharmacies,  but according to DOD officials, these standards and data were not  available.
To determine the extent to which DOD has monitored the satisfaction of  participating beneficiaries, we requested information and data on  communications that DOD made with pilot beneficiaries regarding  satisfaction. We reviewed DOD’s quarterly survey data on beneficiary  satisfaction with TRICARE’s mail-order program that overlapped with the  first year of the pilot from February 2014 through February 2015. We  also requested information and data on communications made with pilot  beneficiaries regarding satisfaction with MTF pharmacies; however, this  information and data were not available according to DOD officials. We  also spoke with officials from two military service organizations about their  members’ experiences and satisfaction with the pilot.
To determine the extent to which DOD achieved its expected cost savings  for the first year of the pilot, we compared the projected cost savings that  DOD reported prior to the start of the pilot and ESI’s estimate of cost  savings for the first year (February 2014 through February 2015). reviewed the methodology for both of these estimates.
For the purpose of this report, DOD’s estimate that was developed prior to the start of  the pilot will be referred to as the “projected cost savings.” ESI’s estimate will be referred  to as the “estimate of cost savings for the first year of the pilot.”
To determine the extent to which DOD has prepared for the expansion of  the pilot requirements to all eligible TRICARE beneficiaries, we  interviewed DOD officials and requested documents evaluating the pilot  and planning documents for the expansion. We also reviewed DOD’s  contract with ESI to determine if it included requirements specific to the  expansion.
For each of our research objectives, we interviewed DOD officials and, as  appropriate, ESI officials. These interviews included discussion about  how DOD assessed the quality of the data and about the data systems  that generate the reports provided to DOD. Based on our review of the  information describing the data collection, analysis, cost saving estimates,  and systematic checks of the data provided by DOD and ESI, we  determined the data were sufficiently reliable for our purposes. In  addition, we reviewed the relevant standards for internal control in the  federal government.
We conducted this performance audit from March 2015 to September  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: In February 2014, DOD began mailing notices to TRICARE for Life  beneficiaries eligible for the pilot informing them of the pilot requirements  for filling covered medications through mail order or MTF pharmacies,  rather than retail pharmacies. In its contract with DOD, ESI is responsible  for implementing the mail-order component of the pilot, which includes  operating a call center through which beneficiaries may ask questions  about the pilot and transfer prescriptions from a retail pharmacy to mail  order. According to DOD officials, individual MTF pharmacies are  responsible for implementing the MTF pharmacy component of the pilot.  DOD’s Defense Health Agency’s Pharmacy Operations Division is  responsible for monitoring both the mail-order and MTF-pharmacy  components of the pilot.
After receiving DOD’s notice, beneficiaries are allowed two 30-day supply  refills at a retail pharmacy as a courtesy. The courtesy refills give  beneficiaries time to transfer their prescriptions to mail order or an MTF  pharmacy, according to DOD officials. After each of these two refills,  ESI contacts the beneficiary by letter to remind them about the options for  obtaining future refills—either through mail order, through an MTF  pharmacy, or by paying 100 percent of the cost at a retail network  pharmacy. Requests for coverage for a third refill at a retail pharmacy are  denied.
Eligible beneficiaries may waive participation in the pilot. Specifically,  beneficiaries may obtain blanket waivers for medications needed for  acute care or covered by other health insurance. Beneficiaries may also  qualify for waivers in certain special circumstances, such as living in a  nursing home. These waivers are granted on a case-by-case basis.  Additionally, under the law and implementing regulations, beneficiaries  may opt out of the pilot after participating for 1 year.
ESI reported to DOD that there were about 317,000 TRICARE for Life  beneficiaries eligible to participate in the pilot from February 15, 2014  through February 28, 2015.  Of those beneficiaries who were eligible,  about 186,000 (59 percent) transferred their prescriptions from a retail  pharmacy to mail order for medications covered for the pilot. DOD did not  have data on the number of eligible pilot beneficiaries who transferred  their prescriptions from a retail pharmacy to an MTF pharmacy.  Beneficiaries who did not participate in the pilot did so for reasons such  as obtaining an override, which is an approval to refill a prescription for a  covered medication at a network retail pharmacy when not available  through mail order.
ESI reports these numbers at the end of each month to DOD and updates them as  prescriptions are processed for the pilot. The numbers shown were reported as of March  2015.
The NDAA for Fiscal Year 2013 included a provision for the pilot to run for  5 years expiring by December 31, 2017. However, the NDAA for Fiscal  Year 2015 terminated the pilot effective September 30, 2015 and  expanded the requirements for the pilot to all eligible TRICARE  beneficiaries beginning October 1, 2015. For the expansion, the  requirements for filling prescriptions through mail order and MTF  pharmacies are to generally remain the same as for the pilot; however,  the option to opt out after participating for 1 year will not be permitted,  according to DOD officials. Although the NDAA for Fiscal Year 2015  also increased the copayments for all TRICARE prescriptions filled at  retail pharmacies and through mail order, they continue to be less through  mail order than at retail pharmacies. Additionally, there continues to be no  copayment for prescriptions filled at MTF pharmacies.
section_title: DOD Has Not Fully Monitored the Availability of Covered Medications or the Timeliness and Accuracy of Prescriptions Filled for the Pilot
paragraphs: DOD has monitored the availability of covered medications, but has not  separately tracked the timeliness and accuracy of prescriptions filled for  the pilot through mail order. DOD also has not systematically tracked any  of this information for the pilot across MTF pharmacies.
subsections: section_title: DOD Has Monitored Availability of Covered Medications for the Pilot through Mail Order
paragraphs: In the contract in effect at the start of the pilot, DOD required ESI to  monitor the availability of covered medications for the pilot through mail  order. According to DOD officials, there have been some overall issues  with availability in mail order due to a medication being out of stock  because of a manufacturer shortage. For the pilot, when a covered  medication is not available through mail order, the affected beneficiary  may receive an override to obtain the medication from a retail pharmacy.  ESI officials told us that the affected beneficiary must receive an override  for each prescription for a covered medication that is out of stock. From  March 2014 through February 2015, these officials told us that 5,069 pilot  beneficiaries (approximately 3 percent of those that participated) received  5,611 overrides. This represented less than 1 percent of the prescriptions  filled through mail order for the pilot, and was comparable to the  availability experience of the entire TRICARE mail-order program. ESI  officials said that of the 5,611 total overrides approved, only 1,448 were  actually used by beneficiaries to obtain covered medications from a retail  pharmacy. DOD officials offered possible explanations for this low use,  including that the physician may have changed the medication or that the  beneficiary may have decided to fill the prescription at an MTF pharmacy  instead of a retail pharmacy. Another potential explanation for not using  the override may be the higher copayment to fill a covered medication at  a retail pharmacy.
section_title: DOD Has Monitored the Timeliness and Accuracy of Prescriptions Filled through Mail Order for All of TRICARE, but Not Separately for the Pilot
paragraphs: In the contract in effect at the start of the pilot, DOD required ESI to report  monthly on the timeliness and accuracy of all TRICARE prescriptions  filled through mail order, but not separately for the pilot. Prescriptions  filled by pilot beneficiaries represented about 3 percent—about 785,000  prescriptions—of the approximately 25 million total prescriptions filled  through mail order from February 2014 through February 2015. DOD  officials said that since they expected the performance standards and the  process for the mail-order program to be the same for the pilot, they did  not require separate reports to monitor the timeliness and accuracy of  prescriptions filled for the pilot. Absent such separately tracked data for  the pilot, however, it may not be clear to what extent any issues identified  through DOD’s monitoring efforts may have affected prescriptions filled  for the pilot differently than for all TRICARE prescriptions. Federal internal  control standards suggest that agencies should monitor performance data  to assess the quality of performance over time. Monitoring is particularly  important during transitions of care, such as for medications. Without  monitoring performance data separately for the pilot, DOD does not know  what, if any, problems beneficiaries may have experienced filling their  prescriptions. As a result, DOD lacks potentially important information to  help inform the upcoming expansion of the pilot requirements, which is  slated for October 1, 2015.
Because separate reports on the pilot’s performance were not available,  we reviewed the monthly timeliness and accuracy reports that ESI  provided to DOD for all TRICARE mail-order prescriptions from February  2014 through February 2015. We found that ESI did not meet one of the  four timeliness performance standards—shipping 95 percent of  prescriptions within 2 calendar days if a clarification or intervention, such  as a consultation from a pharmacist, is not required—for June and July  2014. During these 2 months, some pilot beneficiaries may have reached their limit of two courtesy refills at a retail pharmacy and may  have been in the process of transferring their prescriptions to mail order.  Therefore, to determine if there were any differences in meeting the  timeliness performance standards for the pilot compared to all mail-order  prescriptions, we requested ESI create separate reports specifically for  the pilot. However, the information ESI provided was for all prescriptions  filled by pilot beneficiaries, not just those for covered medications.
The information ESI provided to us showed that, similar to performance  results for all mail-order prescriptions, for 2 months of the pilot ESI did not  meet one of the four timeliness standards. As with all mail-order  prescriptions, ESI did not meet the standard that 95 percent of  prescriptions be shipped within 2 calendar days of receipt if a clarification  or intervention is not required. For June and July 2014, ESI shipped   84 percent of all prescriptions filled by pilot beneficiaries within 2 days,  compared to 86 percent for the entire mail-order program. DOD reported  that in June 2014, ESI experienced a system-wide issue—not specific to  the pilot—with an automatic refill process that was operating improperly  and was not processing prescriptions, which caused a backlog during  June and July 2014. However, because data were not separately tracked  for the pilot, DOD does not know whether pilot beneficiaries were  disproportionately affected for covered medications.
For the accuracy of prescriptions filled, ESI reported meeting the  performance standard of 100 percent accuracy each month for all  TRICARE prescriptions, including those for the pilot, for the entire period  from February 2014 through February 2015. DOD officials said ESI has  an internal process to identify potential errors during the prescription- filling process, such as a pharmacist checking after a technician enters  prescription information into its data system; or weighing the contents of a  prescription to verify that the correct number of units was dispensed.  Once a prescription is dispensed to a beneficiary, DOD officials told us  that prescription accuracy is measured as the percent of prescriptions  dispensed that did not have a validated error, such as a shipping error,  having two different medications mixed in a bottle, or incorrect drug,  strength, form, patient name, or address. ESI is notified of dispensing  errors when a beneficiary contacts them regarding the error and shipping  errors are identified when the medication is returned through the mail.
section_title: DOD Has Not Systematically Monitored the Availability of Covered Medications or the Timeliness and Accuracy of Prescriptions Filled for the Pilot across MTF Pharmacies
paragraphs: For the pilot, DOD has not systematically monitored the availability of  covered medications, or the timeliness and accuracy of prescriptions filled  across MTF pharmacies. According to the standards for internal control in  the federal government, agencies should establish and review  performance standards, and then monitor these data to assess the quality  of performance over time. DOD has not established performance  standards across MTF pharmacies for ensuring that covered medications  are available and prescriptions are filled in a timely and accurate manner  for pilot beneficiaries. Additionally, while some individual MTF pharmacies  may collect and monitor performance data on their own, DOD has not  systematically collected and monitored this information for the pilot  because the department does not have a central data system for doing  so. As a result, DOD is unable to assess the availability of covered  medications and whether these prescriptions were filled in a timely and  accurate manner across MTF pharmacies. DOD also does not know if  beneficiaries encountered difficulties in obtaining covered medications.  This information would be beneficial in assisting DOD with the expansion  of the pilot requirements.
section_title: DOD Has Not Monitored Beneficiary Satisfaction with the Pilot
paragraphs: DOD has not monitored the extent to which beneficiaries who participated  in the pilot were satisfied with the transfer of prescriptions to mail order or  MTF pharmacies. Federal internal control standards suggest that  agencies obtain information from external stakeholders who may have a  significant impact on the agency achieving its goals. Communications— such as through a survey—with pilot beneficiaries regarding their  satisfaction with obtaining medications through mail order and MTF  pharmacies are mechanisms that may have assisted DOD in assessing  whether it was achieving its goal for beneficiaries to transfer prescriptions  from retail to mail order and MTF pharmacies. Additionally, a satisfaction  survey of pilot beneficiaries may have provided information about how  well the pilot is being implemented, served as a tool for DOD to assess  the performance of ESI and individual MTF pharmacies, and provided  senior management information to determine what they could do to  improve the pilot’s effectiveness. Federal internal control standards also  require agencies to monitor and assess the quality of performance over  time in order to ensure that findings are promptly resolved. By not  separately surveying pilot beneficiaries’ satisfaction with mail order or  MTF pharmacies, DOD does not know whether beneficiaries faced any  difficulties obtaining their covered medications, which is particularly  important to monitor during transitions of care. Consequently, DOD lacks  assurance that the pilot is working for participating beneficiaries as  intended, and is missing important information that may be useful to help  inform the expansion of the pilot’s requirements to all eligible TRICARE  beneficiaries.
For mail order, DOD officials who monitor the pilot told us they have relied  on the results from a quarterly survey of all TRICARE mail-order  pharmacy users— the TRICARE Mail-Order Pharmacy Satisfaction  Survey—to assess the satisfaction of pilot beneficiaries. DOD has not  separately monitored beneficiary satisfaction for the pilot through mail  order because DOD officials said the mail-order process is the same for  pilot and non-pilot beneficiaries, and therefore the results of the TRICARE  Mail-Order Pharmacy Satisfaction Survey would also be applicable to  pilot beneficiaries. However, other DOD officials who monitor the survey  results said they do not recommend generalizing the survey results to the  overall TRICARE mail-order population or to pilot beneficiaries, thus  making the use of these data for this purpose questionable. These  officials said they do not know how representative the survey respondents  are of the TRICARE mail-order population or pilot beneficiaries.beneficiaries may have different characteristics than those of all mail- order beneficiaries. Officials told us that DOD does not collect  demographic information of survey respondents (e.g., age, regional  information) and has never compared the information on the survey  respondents to the overall mail-order population to assess similarities   Pilot  between the two groups. Moreover, DOD has not compared the  characteristics of beneficiaries who responded to the survey to those that  did not, and consequently, is therefore unable to determine  representativeness and how these characteristics may be related to  satisfaction.
DOD also has not monitored beneficiary satisfaction with the pilot based  on calls to ESI’s call center. DOD officials told us that beneficiaries could  use the call center to express complaints with the pilot. ESI reported at  least two significant increases in call volume during March and May of  2014, which DOD and ESI officials said they thought was due largely to  beneficiaries seeking assistance in transferring prescriptions from a retail  pharmacy to mail order. For example, according to DOD and ESI officials,  the increase in call volume in March 2014 could have been due to eligible  beneficiaries having received their initial letters to transfer their  prescriptions for the pilot. In May 2014, beneficiaries who used courtesy  refills may have started to reach their two-refill limit at a retail pharmacy  and would therefore need to transfer prescriptions to mail order or MTF  pharmacies. However, DOD officials told us that ESI is not required to  track the details of these calls, including whether beneficiaries expressed  any complaints with the pilot. According to these officials, ESI provided  general feedback about the pilot during monthly meetings with DOD.
Additionally, DOD officials told us they have not monitored beneficiary  satisfaction with the pilot across MTF pharmacies. DOD officials said  because they do not have a central data system to track pilot  beneficiaries that transferred prescriptions from a retail pharmacy to an  MTF pharmacy, they are unable to assess beneficiary satisfaction for the  pilot. However, DOD officials said that individual MTF pharmacies may  assess beneficiary satisfaction.
Although DOD did not assess pilot beneficiary satisfaction, two military  service organizations—the Military Officers Association of America  (MOAA) and The Retired Enlisted Association (TREA)—reported  informally collecting information from members about their experience  with the pilot. A TREA representative told us that some of their members  reported having problems with the initial enrollment, but said that once the  pilot started the organization stopped receiving complaint calls and  surmised the pilot was working well. Similarly, a MOAA representative  reported their members having an issue with the “roll out” of the pilot. This  representative also reported contacting members who participated in the  pilot, and found that a little more than half of 40 members contacted  indicated they were better off having received their medications through  the pilot, thus illustrating that while some are satisfied with the pilot, there  may be varying levels of satisfaction among participating beneficiaries.
section_title: DOD’s Estimated Cost Savings for the First Year of the Pilot Were Generally Comparable to Projected Cost Savings
paragraphs: As of February 2015, ESI estimated that DOD saved approximately   $123 million based on prescriptions processed through mail order for the  first year of the pilot. This number was comparable to DOD’s projected  cost savings of approximately $120 million that was estimated prior to the  start of the pilot (see table 1).
The estimated cost savings for the first year of the pilot did not reflect  prescriptions transferred to MTF pharmacies because DOD has not  tracked these prescriptions for the pilot, according to DOD officials.  Rather, these officials said they expected that most beneficiaries  participating in the pilot would transfer their prescriptions from retail  pharmacies to mail order rather than to MTF pharmacies based on a  model the department developed. This model examines workload at  retail, mail order, and MTF pharmacies, and shows that most  prescriptions have moved from retail to mail order over time. Cost savings  may have been greater than the estimated $123 million had prescription  transfers from retail pharmacies to MTF pharmacies been included  because MTF pharmacies are a lower-cost option than retail pharmacies.
section_title: DOD Has Issued Regulations, but Has Not Finalized Planning Documents for the Expansion of the Pilot Requirements
paragraphs: As of August 6, 2015, DOD issued an interim final rule implementing the  expansion of the pilot requirements to all eligible TRICARE  beneficiaries.developing planning documents for the expansion of the pilot  requirements to all eligible TRICARE beneficiaries, but have not finalized  these documents. Officials explained that they will use planning  documents prepared for the pilot (e.g., a plan to communicate the  requirements of the program) to guide them in developing these  documents for the expansion. Similarly, officials said that they generally  plan to follow the same processes used for the pilot. For example, they  will mail notices to eligible beneficiaries that they are required to obtain  their covered medications through mail order or from an MTF pharmacy.
DOD officials told us that they are in the process of  DOD officials also stated that they are drafting contractual requirements  for the expansion that will be added to the current pharmacy contract with  ESI. Officials said these contract requirements will likely model those that  were developed for the pilot, including requiring ESI to report monthly  cost savings estimates. While not specific to the expansion, DOD also  added in new requirements to ESI’s current pharmacy contract including  assisting with the transfer of prescriptions from a select number of MTF  pharmacies to mail order, a service that ESI previously did not provide. A  DOD official told us that the ability to transfer a prescription from a retail  pharmacy to mail order has been helpful for beneficiaries and key to  expanding TRICARE’s mail-order program. The official added that these  new requirements will give ESI the ability to provide the same support to  beneficiaries who want to transfer prescriptions from MTF pharmacies to  mail order.
DOD officials told us that they do not have plans to conduct a systematic  evaluation of the pilot to prepare for the expansion. Officials explained  that because the NDAA for Fiscal Year 2015 required that the pilot end   2 years earlier than expected, there is not enough time to conduct an  evaluation prior to the expansion of the requirements to all eligible  TRICARE beneficiaries. They also told us that the NDAA for Fiscal Year  2013, which established the pilot, did not require that they conduct such  an evaluation. However, officials said they have performed ongoing  assessments during the pilot and identified some lessons learned that will  be incorporated during the implementation of the expansion, such as  ensuring that beneficiaries have sufficient time to transfer their covered  medications so as to not disrupt their medication regimens.
Additionally, DOD does not know how the expected increase in the  number of beneficiaries with the expansion may affect the capacity of mail  order and MTF pharmacies. As of March 2015, ESI estimated that about  416,000 additional beneficiaries will be required to transfer prescriptions  from retail to mail order or MTF pharmacies when the expansion is  implemented. DOD officials told us that ESI officials verbally assured  them that the company has sufficient capacity to handle the increased  volume when the expansion is implemented. DOD did not conduct its own  assessment of ESI’s ability to handle the additional capacity because  DOD officials said they expect ESI to meet the contractual requirements  related to availability, timeliness and accuracy for all mail order  prescriptions, including the additional prescriptions resulting from the  expansion.
DOD officials also stated that MTF pharmacies should be able to handle  the additional capacity for the expansion because they expect most  prescriptions to be transferred to mail order based on the workload model  previously discussed. However, according to DOD officials, this model is  not specific to the pilot and does not track pilot beneficiaries’ use of MTF  pharmacies to predict how the expansion could affect MTF pharmacies’  workload. Additionally, because DOD has not monitored the availability,  timeliness or accuracy of prescriptions filled for covered medications,  beneficiary satisfaction, or cost savings for the pilot across MTF  pharmacies, it does not know how the expansion may impact the capacity  of MTF pharmacies.
We recognize that NDAA for Fiscal Year 2015 shortened the period of the  pilot; however, the lack of systematic monitoring that we identified and  discussed earlier in the report suggests that DOD, in planning for the  expansion of the pilot requirements, would benefit from enhanced  emphasis on the monitoring of the availability of covered medications, the  timeliness and accuracy of prescriptions filled through mail order and  MTF pharmacies, and beneficiary satisfaction. This would be consistent  with federal standards for internal controls, which supports monitoring to  be performed continually and ingrained in an agency’s operations.
section_title: Conclusions
paragraphs: While DOD’s monitoring of the effects of the pilot on participating  beneficiaries has been limited, the pilot appears to have yielded  substantial cost savings for the government and lower copayments for  beneficiaries during its first year. These savings are expected to grow  once the requirements of the pilot are expanded to all eligible TRICARE  beneficiaries. As DOD implements the expansion of pilot requirements,  the agency would benefit from improved monitoring of affected  beneficiaries, including the availability of covered medications, the  timeliness and accuracy of prescriptions filled, and satisfaction.  Particularly in light of the absence of a systematic evaluation of the pilot  and its implications for the full expansion, such monitoring is important in  identifying and addressing problems that may occur as beneficiaries  transition their covered medications from retail to mail order or MTF  pharmacies.
section_title: Recommendation for Executive Action
paragraphs: To be able to identify and address problems that may occur and thus help  ensure a smooth transition, we recommend that the Secretary of Defense  require the Defense Health Agency ensure that planning documents for  the expansion include specific requirements to continuously monitor  affected beneficiaries, including whether  covered medications are available and filled in a timely and accurate  manner through mail order and across MTF pharmacies; and beneficiaries are satisfied with the transition to mail order and MTF  pharmacies.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, DOD concurred with our audit  findings and conclusions, as well as our recommendation that planning  documents for the expansion should include requirements to monitor  affected beneficiaries, including the availability of covered medications,  the timeliness and accuracy of prescriptions filled, and the satisfaction of  beneficiaries with mail order and MTF pharmacies. DOD’s comments are  reprinted in Appendix II.
DOD commented that the experience and lessons learned from the pilot  were included in developing the pharmacy contract requirements to  expand the program. Subsequent to sending the draft report to DOD for  comment, the pharmacy contract was modified on September 3, 2015 to  include requirements for the expansion. Upon our review of the modified  contract, we found that the requirements related to the expansion did not  require the separate monitoring of the timeliness and accuracy of  prescriptions filled for beneficiaries directly affected by the expansion who  are transitioning from retail to mail order. We maintain that DOD would  benefit from monitoring performance separately for these affected  beneficiaries. This population, which takes maintenance medications for  chronic conditions, may represent a different profile of prescriptions than  for all mail-order beneficiaries. Therefore, this population may experience  timeliness and accuracy differently than do all mail-order beneficiaries.  Without monitoring performance data separately, it may not be clear to  what extent any issues identified through DOD’s monitoring efforts may  be different for this population, especially during the initial transition from  retail to mail order.
DOD also commented that after the expansion occurs beneficiary  satisfaction with mail order will continue to be measured as it was done  previously through a survey of all TRICARE mail-order pharmacy users.  However, as we reported, the results of this survey of all TRICARE mail- order pharmacy users may not represent well the satisfaction of sub- populations, such as affected beneficiaries. Also, as we reported, DOD  officials who monitor this satisfaction survey said they do not recommend  generalizing the survey results for multiple reasons, such as being unable  to determine representativeness of the survey respondents. We maintain  that DOD should separately survey the satisfaction of affected  beneficiaries with mail order given that this population may have different  characteristics than those of all mail-order beneficiaries generally, and  those differences may be associated with satisfaction. Without assessing  the satisfaction of affected beneficiaries, DOD will not know whether  these beneficiaries faced any difficulties in obtaining their covered  medications, which is important to know during transitions of care.
Finally, DOD commented, that there is no indication based on workload  data, that affected beneficiaries will choose to use MTF pharmacies once  the expansion occurs. In addition, DOD commented that MTF pharmacies  will continue to individually monitor their own performance and beneficiary  satisfaction according to individual performance standards. However, as  we discuss in the report, DOD officials told us that the workload model  does not specifically track pilot beneficiaries’ use of MTF pharmacies to  predict how the expansion could affect MTF pharmacies’ workload. Given  that there are 416,000 additional beneficiaries expected to be affected by  the expansion and that their use of MTF pharmacies could be different  than the use for all TRICARE beneficiaries generally, we maintain that  DOD would benefit from systematically monitoring affected beneficiaries,  including across MTF pharmacies. Without doing so, DOD will not know if  affected beneficiaries encountered difficulties in obtaining covered  medications.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Methodologies to Develop the TRICARE for Life Pharmacy Pilot’s Cost Savings Estimates
paragraphs: The estimated cost savings for the first year of the pilot of $123 million  were generally comparable to the projected cost savings of approximately  $120 million that the Department of Defense (DOD) reported prior to the  start of the pilot. The $120 million estimate represented projected cost  savings from the transfer of prescriptions for brand maintenance  medications from retail pharmacies to either TRICARE’s mail-order  pharmacy program or a military treatment facility (MTF) pharmacy. The  $123 million estimate represented cost savings from the transfer of  prescriptions for covered brand maintenance medications (hereafter  referred to as covered medications) from retail pharmacies to TRICARE’s  mail-order program for the period February 15, 2014 through   February 28, 2015.
DOD’s projected cost savings for the pilot. DOD officials told us that  they made some assumptions about the transfer of prescriptions for  brand maintenance medications from retail pharmacies to mail order or  MTF pharmacies in calculating the projected cost savings of $120 million  for a calendar year. DOD assumed that cost savings would be the same if  they repriced these retail prescriptions to reflect the cost at mail order or  at MTF pharmacies because the average cost of a brand maintenance  medication was about the same at both, based on a model that DOD  developed. For the purposes of calculating projected cost savings, DOD officials told us that they assumed that 100 percent of the retail  prescriptions would transfer to mail order, but told us the projected cost  savings would have been about the same if they assumed that less than  100 percent of retail prescriptions were transferred to mail order (e.g., if  90 percent were transferred to mail order and 10 percent were transferred  to MTF pharmacies).
To develop the projected cost savings of $120 million, DOD officials  explained that they used data from the fourth quarter of 2012 to determine that  approximately 800,000 prescriptions for brand maintenance  medications were filled by beneficiaries aged 65 years and older at  retail pharmacies, determined the retail cost for each of these prescriptions, typically  filled for a 30-day supply, including ingredient cost, dispensing fees  and administrative fees,  converted the retail cost of these prescriptions from a 30-day supply  to the cost for a 90-day supply (e.g., the ingredient cost for a 30-day  supply at a retail pharmacy of $10 would have been $30 for a 90-day  supply at a retail pharmacy), determined what the cost would have been for these prescriptions if  they had been filled through mail order, typically filled for a 90-day  supply,  calculated the difference in the copayment that a beneficiary paid at a  retail pharmacy to the copayment for mail order,  calculated the total cost savings for filling these 800,000 prescriptions  at mail order instead of at retail pharmacies: retail cost less mail-order  cost and copayment difference. Any manufacturer refunds for brand  maintenance medications filled through retail pharmacies also were  taken into account. This yielded a savings of about $40 million per  quarter.
DOD officials explained that after accounting for factors such as  beneficiaries using the courtesy refills at retail and receiving waivers to  not participate in the pilot, they assumed that about 75 percent of the   $40 million quarterly savings would be achieved. Therefore, they  projected that the pilot would save about $30 million per quarter, or   $120 million for a calendar year.
Express Scripts Inc.’s estimate of cost savings for the first year of  the pilot. DOD requires Express Scripts, Inc. (ESI)—the pharmacy  benefits manager that DOD contracts with to manage its network of retail  pharmacies and mail-order program—to calculate and report a monthly  cost savings estimate for mail-order prescriptions specific to the pilot.
To develop the cost savings estimate of $123 million for the first year of  the pilot (February 15, 2014 through February 28, 2015), ESI officials  explained that they used data from February 15, 2014 through February 28, 2015 to  determine that approximately 785,000 prescriptions for covered  medications were filled through mail order for the pilot, determined the mail-order cost of these prescriptions, typically filled  for a 90-day supply, including ingredient cost, dispensing fees, and  administrative fees,  converted the mail-order cost of each of these prescriptions from a  90-day supply to the cost for a 30-day supply (e.g., the ingredient cost  for a 90-day supply at mail order of $30 would have been $10 for a  30-day supply at a retail pharmacy), determined what the cost would have been for these prescriptions if  they had been filled at a retail pharmacy, typically filled for a 30-day  supply,  calculated the difference between the copayments at mail order to the  copayments that beneficiaries would pay at retail pharmacies,  calculated the total cost savings for filling these 785,000 prescriptions  through mail order instead of at retail pharmacy: total ingredient cost  difference plus dispensing fee difference plus administrative fee  difference less copayment difference. Any manufacturer refunds   for brand maintenance medications filled through retail pharmacies  were also taken into account. This resulted in a savings of about   $132 million.  subtracted an administrative fee DOD pays ESI to transfer each  prescription from retail pharmacy to mail order through its call center.  According to a DOD official, the administrative fee to transfer  prescriptions from retail pharmacies to mail order is an initial  discretionary cost that DOD chose to incur to ensure a smooth  transition for beneficiaries. After subtracting the $9 million  administrative fee related to the transfer of prescriptions through ESI’s  call center, the net cost savings for the pilot through mail order was  $123 million.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Debra A. Draper, (202) 512-7114 or draperd@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact name above, Rashmi Agarwal, Assistant  Director; Jennie F. Apter; Jacquelyn Hamilton; Deitra H. Lee;   Eric Wedum; and Joanna Wu made key contributions to this report.
section_title: Related GAO Products
paragraphs: Compounded Drugs: TRICARE’s Payment Practices Should Be   More Consistent with Regulations. GAO-15-64. Washington, D.C.:  October 2, 2014.
Prescription Drugs: Comparison of DOD, Medicaid, and Medicare   Part D Retail Reimbursement Prices. GAO-14-578. Washington, D.C.:  June 30, 2014.
Defense Health Care: Evaluation of TRICARE Pharmacy Services  Contract Structure Is Warranted. GAO-13-808. Washington. D.C.:  September 30, 2013.
Prescription Drugs: Overview of Approaches to Control Prescription   Drug Spending in Federal Programs. GAO-09-819T. Washington, D.C.:   June 24, 2009.
DOD Pharmacy Program: Continued Efforts Needed to Reduce Growth   in Spending at Retail Pharmacies. GAO-08-327. Washington, D.C.:   April 4, 2008.
DOD Pharmacy Benefits Program: Reduced Pharmacy Costs Resulting  from the Uniform Formulary and Manufacturer Rebates. GAO-08-172R.  Washington, D.C.: October 31, 2007.
TRICARE: Enrollment of the Department of Defense’s TRICARE  Beneficiaries in Medicare Part B. GAO-06-489R. Washington, D.C.:   June 30, 2006.
Mail Order Pharmacies: DOD’s Use of VA’s Mail Pharmacy Could  Produce Savings and Other Benefits. GAO-05-555. Washington, D.C.:  June 22, 2005.
Defense Health Care: Need for Top-to-Bottom Redesign of Pharmacy  Programs. GAO/T-HEHS-99-75. Washington, D.C.: March 10, 1999.
Defense Health Care: Fully Integrated Pharmacy System Would Improve  Service and Cost-Effectiveness. GAO/HEHS-98-176. Washington, D.C.:  June 12, 1998.