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GAO-08-172R 1 (2007-10-31)

handle is hein.gao/gaocrptavqd0001 and id is 1 raw text is: Sai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 October 31, 2007 Congressional Committees Subject: DOD Pharmacy Benefits Program: Reduced Pharmacy Costs Resulting from the Uniform Formulary and Manufacturer Rebates Rising pharmacy costs have been a long-standing issue for the Department of Defense (DOD). In 1998, we reported that DOD's fiscal year 1997 total pharmacy costs were $1.3 billion-a 13 percent increase from fiscal year 1995.' In fiscal year 2006, DOD dispensed 115 million prescriptions to about 6.5 million beneficiaries at a cost of about $6 billion. One effort to control pharmacy costs is through the use of a uniform formulary, which is a list of preferred drugs that are generally available to beneficiaries. The National Defense Authorization Act for Fiscal Year 2000 directed DOD to establish a pharmacy benefits program that included a uniform formulary.2 DOD implemented the uniform formulary in 2005.' Drugs on the uniform formulary are generally available at military treatment facilities (MTF), the TRICARE Mail Order Pharmacy (TMOP), and retail pharmacies.4 Each quarter, DOD reviews drugs for inclusion on the uniform formulary. DOD's decision to designate a drug as either formulary or nonformulary is based on the drug's clinical and cost- effectiveness relative to the other drugs in its therapeutic class.' In its decision-making process, DOD considers information such as the drug's indications, clinical outcomes, and the price a manufacturer is willing to charge DOD if the drug is selected for placement on the uniform formulary. DOD's costs for a drug may vary depending on whether the drug is dispensed at an MTF, the TMOP, or a retail pharmacy. In exchange for formulary placement, manufacturers can offer DOD prices below those otherwise available through statutory 'GAO, Defense Health Care: Fully Integrated Pharmacy System Would Improve Service and Cost- Effectiveness, (GAO/I-ETTS-98-17ti (June 12, 1998). 2See Pub. L. No. 106-65, § 701, 113 Stat. 512, 677-80 (1999) (codified as amended at 10 U.S.C. § 1074g). 3The process DOD uses to develop the uniform formulary was established by the National Defense Authorization Act for Fiscal Year 2000. 4DOD contracts with Express Scripts, Inc., a private pharmacy benefits management company, to operate its retail network pharmacy program. The network consists of more than 59,000 retail pharmacies where DOD beneficiaries can pick up prescriptions. 5 A therapeutic class is a group of drugs that are similar in chemical structure, pharmacological effect, or clinical use. GAO-08-172R DOD Pharmacy Benefits Program

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