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The Honolulu Advertiser
Posted on: Monday, July 24, 2006

Tricare rebates face resistance

By Tom Philpott

As the Justice Department prepares to battle drug manufacturers in court to win what U.S. lawyers say are long overdue price rebates for the Tricare retail pharmacy network, the White House quietly is pressuring Congress not to interfere.

Bush administration politicos have aligned the president behind the drug makers and have undercut the Defense Department's plea for legislative relief from high retail drug costs.

The administration's cozy relationship with the pharmaceutical industry may be costing the military as much as $260 million a year in drug rebates. Those costs, in turn, could encourage Congress to crimp access to the Tricare retail network for beneficiaries needing maintenance drugs.

The charges leveled here come from various critics of the White House stance. Most are Democrats, but a few are disgruntled Republicans.

Drugstore chains also are upset. Their lobbyists worry that efforts to protect drug manufacturers will keep government costs so high in the Tricare retail network that Congress and Defense officials will take other actions to curb costs. These could include forcing beneficiaries to have prescriptions filled by mail order or enticing them through co-pay changes.

The controversy involving the White House surfaces as Defense officials are desperate to ease the growth of pharmacy costs. Since 2000, total costs have climbed from $1.6 billion to almost $6 billion. The sharpest growth has been in the retail network. Tricare prescriptions filled by commercial druggists have tripled over five years.

The cost of the Tricare retail network has climbed even faster because brand-name drug manufacturers refuse to grant discount prices, as they already do on drugs dispensed on base or through Tricare mail order.

Lawyers for the departments of Veterans Affairs and Defense agreed last year that the Veterans Health Care Act of 1992 directs drug manufacturers to grant discounts on all drugs supplied to DoD, VA, the Public Health Service and the Coast Guard. The discounts are provided as rebates, which, on average, lower government costs by 30 to 40 percent.

Last fall, the big pharmaceutical companies answered that finding by filing a lawsuit in the U.S. Court of Appeals for the Federal District. It argues that the usual federal rebates do not apply to the Tricare retail program.

Assistant Secretary of Defense for Health Affairs William Winkenwerder appeared before the Senate armed services' subcommittee on military personnel last April and asked for help. He said drug makers owed rebates to Tricare worth over $450 million, and the tab is rising.

"In other words," Winkenwerder told senators, "our budget issues would be relieved by that much if we had what we think is due us."

The Defense Department's 2007 budget assumes payment of the drug industry rebates for the Tricare retail network. Yet Congress never received a specific legislative proposal from the department asking to clarify the law. Those who want the rebates paid think the Office of Management and Budget blocked it.