The New Tricare Pharmacy Contract: Delivering Value for Military Families and Taxpayers

Processed medications await pick up at the pharmacy on Ellsworth Air Force Base, S.D.
Processed medications await pick up at the pharmacy on Ellsworth Air Force Base, S.D., Oct. 25, 2011. (Zachary Hada/U.S. Air Force)

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I’m proud of the work of our team at the Defense Department to negotiate and implement a new Tricare pharmacy contract. The improvements that were made will not only establish stronger access standards and deliver exceptional value for military families, they will also improve efficiency and stewardship of taxpayer funds.

During my time in public service -- from Congress to the Pentagon, where I now serve as under secretary of defense for personnel and readiness -- I have always worked to put military families first. The new Tricare pharmacy contract has attracted criticism in another op-ed, and I want to respond and correct the record.

The previous contract had two major problems. First, it measured access by the straight-line distance from a beneficiary’s home to a retail pharmacy, so it failed to consider traffic, road conditions or topography -- such as the need to cross a body of water or go around a mountain -- that could make for an unacceptably long journey. Second, the retail network was overly costly and, in some cases, inefficient. The network included pharmacies that were filling few or no prescriptions for our beneficiaries, resulting in unnecessarily high costs. We saw an opportunity to improve service for beneficiaries while saving money for military families and taxpayers by creating a more efficient, competitively priced network.

Under the new contract, 98% of Tricare beneficiaries live within 15 minutes’ driving time of a network retail pharmacy, and more than 99% live within a 30-minute drive. This improved standard for Tricare is comparable to the Veterans Health Administration standard and exceeds the Medicare pharmacy-access standard. By paying competitive fees to pharmacies, we will save an estimated $2 billion in taxpayer funds over the seven-year life of the contract, and beneficiaries are projected to save $100 million through lower out-of-pocket costs. These savings are notable, given long-term trends in the cost of health care: Medicare projects that annual growth in health spending will average 5.1% through 2030. Some beneficiaries have found that their pharmacy is no longer in-network, but the new contract provides other options within a 15-minute drive for nearly all beneficiaries, in addition to mail-order access.

Furthermore, we made these changes while maintaining among the lowest cost-sharing of any health plan. Service members, retirees and their families can fill prescriptions at military hospitals and clinics, via mail order, or at network retail pharmacies. Tricare beneficiaries can fill generic and name-brand prescriptions for $0 copays -- that’s right, no out-of-pocket cost -- at a military pharmacy. At a retail pharmacy, a 30-day fill costs no more than $14 for generics (Tricare beneficiaries pay the lower of the actual cost or $14) and $38 for name-brand drugs. Compare this to one of the most popular health plans for federal employees, the Service Benefit Plan Basic Option, which charges a $15 copay for a 30-day supply of generic drugs, $60 for preferred name-brand drugs, and $90 or more for non-preferred name-brand drugs. And Tricare beneficiaries can pay even less and receive a 90-day supply from a mail-order pharmacy.

I acknowledge that our communication with beneficiaries and pharmacies about the upcoming changes has generated feedback, and I am committed to improving our communication process. After hearing from both beneficiaries and independent pharmacies, we asked the contractor to offer additional time for pharmacies to opt into the contract. As a result, more than 4,000 of the roughly 15,000 independent pharmacies that had left re-joined as a result of the re-solicitation, bringing the total number of independent pharmacies in the network to more than 11,000 -- over half of all independents in the United States. With these additions, Tricare’s current network includes more than 42,500 participating retail pharmacies.

The new Tricare pharmacy contract is more efficient and does right by beneficiaries and taxpayers. That’s exactly what Americans should expect of their government.

As under secretary of defense for personnel and readiness, Gilbert Cisneros Jr. serves as the principal staff assistant and adviser to the secretary of defense for force readiness; force management; health affairs; National Guard and Reserve component affairs; education and training; and military and civilian personnel requirements and management, including equal opportunity, morale, welfare, recreation, and quality of life matters.

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