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TRICARE
MANAGEMENT
ACTIVITY
DoD Pharmacy Programs
TRICARE Conference
25 January 2005
Colonel James H. Young
Director, DoD Pharmacy Programs
1
TRICARE
MANAGEMENT
Vision
ACTIVITY
Provide a World-Class Pharmacy Benefit with a
seamless interface between all three points of service
2
TRICAREHow Can We Realize Our Vision
MANAGEMENT
ACTIVITY
• Clearly define the roles for DoD Pharmacy and
individual Service Pharmacy Operations
• Provide coordinated program oversight, benefit
management, open and effective communication, and
policy support to optimize delivery of pharmacy benefit
• Improve management of resources, based on metrics,
that include both administrative overhead and drug
acquisition costs comparing all three venues
• Ensure appropriate, safe, uniform, consistent, and
equitable drug therapy to meet patients’ clinical needs
in effective, efficient, and fiscally responsible manner
3
DoD Pharmacy Operations
TRICARE
MANAGEMENT
ACTIVITY Organizational Structure
Chief
Health Plan Operations
Deputy Chief
Pharmacy Operations (1)
DoD Pharmacy
PEC/PDTS (48)
Board of Directors (4)
Expert Consultant (0.6) Admin Support (1)
Deputy Director Deputy Director
Policy Analyst (1)
Operations (1) Systems (1)
Budget Analyst (1) Systems Analyst (1)
Program Management
Support (1)
4
TRICARE
MANAGEMENT
Pharmacy Board of Directors
ACTIVITY
• Colonel W. Mike Heath, US Army Pharmacy Consultant (Chairperson)
• Colonel Jim Young, Director, DoD Pharmacy Programs
• Commander Mary Fong, US Coast Guard Pharmacy Consultant
• Colonel Phil Samples, US Air Force Pharmacy Consultant
• Captain Elizabeth Nolan, US Navy Pharmacy Consultant
• Commander Mark Richerson, Director, DoD Pharmacoeconomic Cntr
5
Pharmacoeconomic Center
TRICARE
MANAGEMENT
ACTIVITY Organizational Structure
CDR Mark Richerson
Director
CDR Jill Pettit LTC Don DeGroff
TRRx COR TMOP COR
Clinical Operations Pharmacy Benefit Operations
(15 FTEs) (32 FTEs)
3 Pharmacy officers
1 pharmacy officer
3 Medical Officers
1 civilian pharmacist
4 Civilian pharmacists
2 supervisors
2 NCOs
17 tier I call coordinators
1 secretary
6 tier II call coordinators
1 data administrator
1 IM/IT infrastructure coordinator
1 data analyst
2 administrative assistant / webmaster
6
TRICARE
MANAGEMENT
ACTIVITY
But know also, man has an inborn craving for
medicine. Generations of heroic dosing have
given his tissues such a thirst…for drugs. As I
once before remarked, the desire to take
medicine is one feature that which distinguishes
man, the animal, from his fellow creatures. It is
really one of the most serious difficulties with
which we have to contend. Even in minor
ailments, which would yield to dieting or to
simple home remedies, the doctor’s visit is not
thought to be complete without the prescription.
Sir William Osler, MD, Teaching and Thinking, 1895
7
DoD Pharmacy
TRICARE
MANAGEMENT
Yesterday
ACTIVITY
8
TRICARE
MANAGEMENT
DoD Pharmacy Yesterday
ACTIVITY
• We used typewriters and sometimes desktop computers
• FAX became a common method of transmitting prescriptions
• Providers were writing prescriptions on paper
• Patients stood in long lines…some places they still do
• We filled prescriptions using counting trays and spatulas
• Patient safety was an issue and remains an issue today
• Pharmacy was MTF-centered with limited DoD policy role
• DoD looked to commercial arena to augment and replace
pharmacy operations lost by the closure of many DoD facilities
• Response to evolving needs included expanded access, improved
automation, robust marketing initiatives, and standardization
9
DoD Pharmacy
TRICARE
MANAGEMENT
Today
ACTIVITY
10
TRICARE
MANAGEMENT
DoD Pharmacy Today
ACTIVITY
• Computers “communicate”
• Workflow has been significantly automated
• 6.4 million Unique Users of 9.1 million beneficiaries (70%)
• 536 DoD Dispensing Facilities in 121 MTFs
• Over 54,000 TRICARE Retail Network Pharmacies
• One of the nation’s largest Mail Order Pharmacies
• $5,000,000,000 Pharmacy Benefit Program (100M Rx last yr)
• Pharmacy Data Transaction Service (PDTS) evolving
• Uniform Formulary and Beneficiary Advisory Panel in place
• RxCOTS Contract Award brings us into the future
• Largest drug distribution/pharmacy operation in the world
11
TRICARE
MANAGEMENT
Numbers You Should Know
ACTIVITY
1 = 191
1 = 570,776
99.96 < 5
4000 = 121
12
TRICARE
MANAGEMENT
What The Numbers Mean
ACTIVITY
• In 1 min, DoD fills 191 Rxs
• In 1 hr, we spend $570,776.00
• We process 99.96% Retail Network
transactions electronically in < 5 sec
• Just over 1000 pharmacists and
almost 3000 technicians serve 121
DoD MTFs worldwide
13
TRICARE
TRICARE Eligible Beneficiaries
MANAGEMENT
ACTIVITY FY04
Other
1%
Retirees & Family Active Duty
Members ≥ 65
1.7M 1.8M FY02 8.6 Million
19% 20%
FY03 8.9 Million
FY04 9.1 Million
2.4M
3.1M
26%
Retirees & 34%
Family
Members < 65 Active Duty
Family
Members
Source: DEERS
14
TRICARE
Unique Users - Point of Service
MANAGEMENT
ACTIVITY All Ages, FY04
Unique Users = 6.4M
Mail Order
1%
1%
MTF 4%
2%
52% 23%
17%
Retail
Source: PDTS
15
TRICARE
Unique Users - Point of Service
MANAGEMENT
ACTIVITY By Age, FY04
Unique Users < 65 = 5.0M Unique Users ≥ 65 = 1.3M
MTF
Mail Order Mail Order
3%
<1% 1%
MTF 14%
61% 1% 1%
1%
5%
19% 25% 33%
15%
21%
Retail
Retail
Source: PDTS
16
17
Sep-04
Source: PDTS
Aug-04
MHS Pharmacy Benefit Users
Jul-04
Jun-04
May-04
Mail Order
FY04
Apr-04
Mar-04
Feb-04
Jan-04
Dec-03
Nov-03
By POS, Jul 01 – Sep 04
Oct-03
Sep-03
Aug-03
Jul-03
Jun-03
May-03
Apr-03
FY03
Mar-03
Feb-03
MTF
Jan-03
Retail
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
FY02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
Sep-01
FY01
Aug-01
MANAGEMENT
Jul-01
ACTIVITY
TRICARE
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Millions of Users
TRICARE
MANAGEMENT
ACTIVITY
“Per member per year ingredient
costs continued to rise, increasing
by 14.5% in 2003 for non-specialty
drugs and 38.7% for specialty drugs.
It is projected that without active
management of the pharmacy
benefit, per member per year drug
costs will increase by 125% over the
next five years.”
Drug Trend Report 2003
ESI, June 2004
18
TRICARE
MHS Outpatient Drug Spend
MANAGEMENT
ACTIVITY ($Millions)
FY02 FY03 FY04
MTF* $1,388 $1,565 (12.7%) $1,704 (8.9%)
Retail** $1,278 $1,847 (44.6%) $2,430 (31.6%)
Mail Order** $347 $429 (23.4%) $546 (27.3%)
Total $3,013 $3,841 (27.5%) $4,680 (21.8%)
Note:
1. The Focus here is Outpatient
2. 1997 DoD Drug Expenditures was just short of $1B, today it is $5B
3. * Does not include overhead costs of filling prescription
4. ** and ** does include dispensing and processing fees
Sources: PDTS and Prime Vendor data
19
TRICARE
Cost per Beneficiary by Age
MANAGEMENT
ACTIVITY FY02 – FY04
FY02 FY03 FY04
< 65 $245 $282 (15.1%) $326 (15.5%)
≥ 65 $791 $1,070 (35.3%) $1,309 (22.4%)
All Ages $347 $430 (23.9%) $511 (18.9%)
Source: M2, PDTS, and Prime Vendor data
20
TRICARE
MANAGEMENT
Pharmacy Copay Comparison
ACTIVITY
Retail networks Commercial MCO* Medicare HMO* TRICARE FEHBP**
(up to 30 days)
Generic $8.93 $7.56 $3.00 $10.00
Formulary-Brand $18.77 $19.61 $9.00 $25.00
Non-formulary $32.53 $38.95 $22.00 $40.00
Mail Order (up to
90 days)
Generic $14.58 $17.25 $3.00 $20.00
Formulary-Brand $31.18 $37.22 $9.00 $50.00
Non-formulary $60.68 $73.45 $22.00 $80.00
*Average copays charged within Managed Care Organizations and Medicare HMOs, respectively. Source
“2002 Average Co-payments by Formulary Type and Lines of Business”, Novartis Pharmacy
Benefit Report: 2003 Facts and Figures, Emron Publications, Wayne, New Jersey
** CareFirstBlueChoice Health Plan 2004, beneficiary must also pay $285 per month premiums for
health plan.
21
TRICARE
MANAGEMENT
Pharmacoeconomics Center
ACTIVITY
• Central to today’s pharmacy benefit
• Composed of many parts
– PEC is the clinical and analytical arm supporting P&T
– PDTS is the backbone connecting all venues
– CSSC is our voice to our customers, worldwide
– CORs manage two systems doing 44% workload
22
Pharmacy Data Transaction
TRICARE
MANAGEMENT
ACTIVITY
Service
• PDTS Fully implemented June 2001
• On-line central data repository for all pharmacies
(MTF, TRICARE Retail Network, Mail Order)
• Enhances patient safety through interactive clinical
screening across all points of service
• Robust data warehouse for reporting/trend analysis
23
Military Treatment Facility
TRICARE
MANAGEMENT
ACTIVITY
Pharmacy
• 536 DoD Dispensing Pharmacies in 121 MTFs
• Beneficiaries have access to prescriptions
without co-pay (Least costly to patient)
• Formulary composed of Basic Core Formulary
plus MTF specific additions
• Possibly least costly option to DoD…WDYT?
• 56% Rx workload performed at MTF
24
TRICARE
TRICARE Mail Order Pharmacy
MANAGEMENT
ACTIVITY
• TMOP Contract awarded to Express Scripts, Inc. 11 Sep 02
• Services began 1 Mar 03
• Services via state-of-the-art facility in Tempe, AZ dedicated to
DoD workload
• Product replenishment through Prime Vendor (McKesson ) at
Federal Pricing
• DoD Pharmacist as Contracting Officer Representative
• Largest commercial mail order account transfer within industry
• 13% of Rx workload performed at TMOP
25
TRICARE
MANAGEMENT
TRICARE Retail Pharmacy
ACTIVITY
• TRRx Contract Awarded to Express Scripts, Inc. 26 Sep 03
• Services began 1 Jun 04
• DoD Pharmacist as Contracting Officer Representative
• Consolidated retail pharmacy services under a single
contract to optimize benefit management
– Streamlined claim processing/network management
– Consistent benefit across all regions
• Portability in 50 states, Guam, Puerto Rico, US Virgin Islands
• Pharmacy Help Desk Services 24 x 7 x 365
• TRRx Dedicated Staff
• Almost 54,000 Retail Pharmacies Now Participate
• 31% Rx workload performed at TRRx
26
TRICARE
DoD P&T Committee Process
MANAGEMENT
ACTIVITY
• Identify classes for consideration
• Clinical and cost effective analysis performed by PEC
(data collection, pricing, etc.)
• P&T deliberation and evaluation
• Prepare P&T Minutes for Beneficiary Advisory Panel
and Director, TMA
• BAP meets and provides comments for Dir, TMA
• Recommendations and comments from P&T and BAP
forwarded to Director, TMA
• Decision on recommendations, minutes signed
27
TRICARE
MANAGEMENT
Uniform Formulary Rule
ACTIVITY
• Established process for DoD to determine formulary status
• Established the DoD P&T Committee as the mechanism to
identify agents for the third tier and prior authorizations
• Established the BAP as a means for beneficiary
representatives to comment on P & T recommendations
• Proposed Rule was published 12 Apr 2002
• Comment period closed 11 Jun 2002
• 3311 comments received
– Paper - 1,621 Email - 1,690
• Comments compiled, considered. and Final Rule prepared
• Final Rule published 1 April 2004 including responses
• Implementation
28
TRICARE
MANAGEMENT
Uniform Formulary Benefits
ACTIVITY
• Uniform access to all medications
– Non-formulary access provided through 2 points of
service although legislation required “at least one”
• Provides the tool needed to manage the whole benefit
– Co-pay structure encourages use of TMOP over
retail and network over non-network, especially for
non-formulary products
– Increases standardization among MTF formularies
with BCF and ECF while preserving some flexibility
• Provides beneficiary input to formulary process
through the Beneficiary Advisory Panel
29
Uniform Formulary Is a Critical
TRICARE
MANAGEMENT
ACTIVITY Management Tool
• Formulary management and tiered co-pays are
industry standards and best commercial
business practices used to manage a pharmacy
benefit
• Historically, formulary management was not
uniform across the Military Health System
– TMOP: Has been determined by DoD
Pharmacy and Therapeutics Committee (P&T)
– Direct Care: Has been Basic Core Formulary
via DoD P&T plus local Facility P&T decisions
– TRRx: Has been an open formulary, except for
those excluded by law
30
Key Points
TRICARE
MANAGEMENT
ACTIVITY
Uniform Formulary
• Encourages use of more cost-effective Point of
Service and therapy
• Influences beneficiary and provider choice
• Permits tiered co-pays: Generic, Formulary, NF
• Allows beneficiaries to obtain NF drugs that are
“clinically necessary” at the 2nd Tier co-pay
• Permits Prior Authorization
• Requires Non-formulary drug availability
• Final Rule established new DoD P&T and UF BAP
31
Department of Defense
TRICARE
MANAGEMENT
ACTIVITY
Pharmacy & Therapeutics Committee
PEC
Collects DoD P&T Minutes
Analyzes Makes Decisions posted
Presents
Old
New
DoD P&T BAP TMA Director
Makes Comments Makes Decisions
Recommendations
PEC
Collects Minutes
Analyzes posted
Presents
32
DoD P&T Committee Voting Members
TRICARE
MANAGEMENT
ACTIVITY Your Representatives
• Physician Chairman (HA/TMA)
• Director, DoD Pharmacy Programs, TMA
• Director, DoD PEC
• Internal Medicine providers from each service
• Pediatrician from one service (Army)
• Family Practice from one service (Navy)
• OB/Gyn from one service (AF)
• One provider at large from each service
• One pharmacist from each service
• Coast Guard: one physician or pharmacist
• Department of VA : one physician or pharmacist
• TRRx COR
• TMOP COR
33
DoD P&T Committee Non-Voting
TRICARE
MANAGEMENT
ACTIVITY Members
• JRCAB (readiness folks)
• TMA General Counsel
• TMA Resource Management Directorate
• Defense Supply Center Philadelphia
34
TRICARE
MANAGEMENT
Committee Responsibilities
ACTIVITY
• Evaluate clinical effectiveness and cost
effectiveness of pharmaceutical agents
• Recommend pharmaceutical agents for:
– Uniform Formulary
– Basic Core Formulary
– Extended Core Formulary
• Medical necessity criteria for drugs classified as
non-formulary (3rd tier)
• Restrictions / limitations
– Prior authorization
– Quantity limits
– TRRx and TMOP
35
Beneficiary Advisory Panel
TRICARE
MANAGEMENT
ACTIVITY (BAP)
• Operates under Federal Advisory Committee Act
(FACA) and provides new level of accountability
and oversight for the UF process
• Purpose is to provide beneficiaries a voice and
representation in the UF process
• Members consist of nominees from major
beneficiary representative organizations such as
MOAA, contractors, professionals
36
DoD Formulary Management Policy
TRICARE
MANAGEMENT
ACTIVITY
• HA 04-032 – TRICARE Pharmacy Benefit Program
Formulary Management – 22 Dec 04
– Describes UF, BCF, ECF & MTF Formulary management
• Replaces previous HA formulary policies
– HA 98-034 – Policy for Basic Core Formulary and
Committed Use Requirements Contracts – 27 Apr 1998
– HA 98-025 – Policy for Implementation of the DoD
Pharmacy and Therapeutics Committee – 23 Mar 1997
– HA Memo – Policy for Dispensing Prescriptions in
Outpatient Military Pharmacies – 8 Dec 1999
• 10 USC 1074g requires “you write it, you fill it”
37
TRICARE
DoD Core Formularies
MANAGEMENT
ACTIVITY (Ref: HA 04-032)
• All drug classes will fall under either
– Basic Core Formulary (generally primary care)
– Extended Core Formulary (all other classes, generally
specialized care)
• Drugs are selected for the BCF or ECF because
they provide greater value than other drugs on
the Uniform Formulary
• Where clinically appropriate, MTFs should
maximize the use of BCF and ECF drugs over
other UF drugs
38
TRICARE
MTF Formulary Management
MANAGEMENT
ACTIVITY (Ref: HA 04-032)
• MTF Formularies must contain:
– BCF drugs
– ECF drugs in each ECF drug class that is included on
the MTF formulary
• MTF Formularies may also contain:
– Other UF drugs: generic (1st tier) or formulary (2nd tier)
– Drug used solely for inpatient services
• MTF Formularies cannot contain:
– Drugs classified as non-formulary on UF (3rd tier)
39
TRICARE
Non-formulary Agents
MANAGEMENT
ACTIVITY (Ref: HA 04-032)
• $22 cost share per prescription at Mail Order and
Retail - no questions asked
• $9 cost share if medical necessity is validated
• Excluded from all MTF formularies
– Available only upon approval from non-formulary
special order process that validates Medical Necessity
criteria established by the DoD P&T Committee
• MTF non-formulary special order process can
only be used by:
– MTF providers
– Prescriptions written by a civilian provider to whom the
patient was referred by the MTF
40
TRICARE
MANAGEMENT
Current Issues
ACTIVITY
• Other Health Insurance (OHI)
– 1-866-ASK-4PEC 210-221-6122 FAX
• Mandatory Generic Policy
– Patients notified of policy enforcement after refills expire
• Pharmacy Metrics…Pharmacy Consultants’ Initiative
– Monitor usage/prescribing patterns to provide data to Commander
• Federal Pricing
– First invoices to Manufacturers in January 05
– Website: http://www.tricare.osd.mil/pharm_mfg/default.cfm
• Uniform Formulary/Beneficiary Advisory Panel
– Unexpected delays due to legal interpretations & redrafting of letters
• Cost Savings Initiatives
– Let’s look at some ideas where savings may be realized
41
TRICARE
MANAGEMENT
Contact Information
ACTIVITY
JAMES H. YOUNG, Col, USAF, BSC
Director, DoD Pharmacy Programs
Office of the Assistant Secretary of Defense (HA)
TRICARE Management Activity (OD)
5111 Leesburg Pike, Suite 810
Falls Church VA 22041-3206
703-681-0064 FAX 703-681-1242 DSN 761-0064
James.Young@tma.osd.mil
42
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