MILITARY UPDATE
Drugs bought out of network cost military millions
Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 50, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
By Tom Philpott
A Zocor tablet to control cholesterol costs the military 64 cents if dispensed at military pharmacies or through its mail order pharmacy program. The low price is the result of discounts negotiated with the manufacturer.
The same pill costs the military $3.66, or almost six times as much, when beneficiaries use their third pharmacy option, the TRICARE retail network, to fill Zocor prescriptions at their local drugstore.
Despite the higher costs to the military and taxpayers, and a $9 co-pay to beneficiaries, so many Zocor prescriptions are filled in the retail network that it is the fourth most popular drug, and second most costly, for the TRICARE network. Yet it is available free through base pharmacies and in three times the quantity for the same $9 co-pay when ordered by mail.
"If the Department of Defense wants to reduce the cost of this program, by shifting dispensing locations selected by the beneficiary, this is where the action is," said Dr. Jesse Malkin, an analyst with the RAND Center for Military Health Policy Research in Arlington, Va.
Many millions of dollars can be saved through pharmacy policy changes, particularly aimed at the retail benefit, Malkin suggested at the annual TRICARE conference in Washington, D.C., last month. The potential cost savings on Zocor is tops at 83 percent. But substantial savings to the government are possible on other high-cost drugs including Prilosec (44 percent), Celebrex (33 percent) and Norvasc (43 percent).
Part of the challenge is to educate beneficiaries on how they save pharmacy dollars when they avoid using the retail benefit.
"In one sense it's heartening that Zocor ranked so high at civilian pharmacies, because it's an opportunity for cost savings," Malkin said. If Zocor users elect to fill prescriptions instead at base pharmacies, or by mail order, he said, it will save "an awful lot of money."
"On the other hand," he continued, "it's somewhat disheartening that a drug (is) available so widely and so many folks choose, nevertheless, to get it from a civilian pharmacy."
Beneficiaries don't seem to mind paying a little more themselves for the convenience of using local drug stores. The beneficiary's co-pay is $9 for a 30-day supply of drug from a retail outlet versus $9 for a 90-day supply by mail order and prescriptions filled on base, which are free.
Many beneficiaries use the retail network for another reason: choice. By law, the retail formulary is unrestricted. Base pharmacies and the mail order plan carry a more limited selection of drugs. For example, Lipitor, another cholesterol drug, is only available in the retail network. As a result, it is the most prescribed and costly of any drug in the TRICARE network.
The popularity of the retail benefit is one factor driving up pharmacy costs. Another more obvious factor is the TRICARE Senior Pharmacy Program (TSRx), begun in April 2001. About 1.6 million retirees and family members, age 65 and older, became eligible for the retail drug benefit and the National Mail Order Program (NMOP). On March 1, NMOP will be re-named TMOP, the TRICARE Mail Order Program. Express Scripts of St. Louis will become the new mail-order contractor. Details are on line at: www.express-scripts.com or by calling toll free (866) 363-8667.
Military pharmacy costs are soaring. The total of $855 million in 1996 nearly doubled, to $1.6 billion, by 2000. By 2002, the TSRx plan's first full year, military drug costs hit $3 billion. If the pace of growth were to slow to a relatively modest 12 percent a year, Malkin said, the military still will face a $7.6 billion drug bill by 2010.
Tools to manage those costs are limited. One is to restrict the formulary available on base or through mail order. That occurs now with select drugs like Zocor. "By stocking only one drug (in certain high-cost categories), DoD is able to extract very favorable terms with the manufacturer," Malkin said.
The cost savings are limited, however, as long as beneficiaries can use the "open" retail benefit to get their preferred medicines.
The $9 co-pay is probably too small, Malkin suggested. For $9, retail network users get "a wide-open formulary, no prior authorization required" for certain drugs and "convenience, because most people live within a few miles of a retail pharmacy. You also get the medicine immediately" versus having to wait for delivery by mail.
Last April, Defense officials unveiled a plan for a "uniform formulary." The plan, undergoing a final review, could be implemented later this year. It would expand the list of drugs stocked at base pharmacies and available by mail. A key feature would be a three-tier co-payment scheme that could curb growth in the costly retail benefit. Drugs not available under the expanded "uniform formulary" still would be available through the retail network but at a higher "non-formulary" co-pay of $22 for a 30-day supply.
That still would be less than co-pays under most civilian pharmacy plans having restricted formularies, Malkin said. Average co-pays in commercial plans for non-formulary drugs averages more than $30, he said.
In 2002, 5.7 million military beneficiaries used their pharmacy benefit at an average cost to the government of $527. Prescriptions filled on base accounted for 46 percent of overall costs and the retail network 42 percent. Twelve percent of the pharmacy budget went to mail orders.
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