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S£Research Service
TRICARE's 5th Generation Pharmacy Contract:
TPharm5
November 29, 2022
The Department of Defense (DOD) administers a Military Health System (MHS) that provides health
entitlements authorized in Title 10 of the US. Code (Chapters 55 and 56), organized under a program
called TRICARE. The TRICARE program offers health care benefits to approximately 9.6 million
beneficiaries (servicemembers, military retirees, and family members) in DOD hospitals and clinics
known as military treatment facilities (MTFs), and through networks of participating civilian health care
providers. The Defense Health Agency (DHA) administers the TRICARE program and contracts with
several managed care support organizations, a pharmacy benefit manager, and a dental insurance
organization to deliver health care entitlements.
Title 10, Section 1074g, of the US. Code, requires DOD to establish an effective, efficient, [and]
integrated pharmacy benefits program. As part of this program, DOD makes certain prescription drugs
available to beneficiaries through MTF pharmacies, retail pharmacies, and a home delivery program.
Federal law also establishes beneficiary cost-sharing requirements for prescription drugs that vary by
dispensing location (i.e., MTF, retail, or mail-order pharmacies). DHA adjusts these cost-sharing amounts
annually based on the specified amounts established in law.
On August 5, 2021, DHA awarded a TRICARE Pharmacy Services, 5th Generation (TPharm5), contract
with features that support the MHS Quadruple Aim (defined as increased access to care, improved health
outcomes and health care quality, enhanced beneficiary experience, and lower per capita costs). As DHA
prepares for the 2023 start of the TPharm5 contract, certain contractor actions have generated a number of
constituent concerns.
This Insight provides an overview of TPharm5, proposed retail pharmacy network changes, and DHA
contractor performance monitoring.
What is TPharm5?
On August 5, 2021, DHA awarded TPharm5 to the current TRICARE pharmacy contractor, Express
Scripts, Inc. (ESI). TPharm5 is a firm-fixed-price, incentive/award fee contract, which includes a 15-
month base period and up to seven 12-month option periods. The contract has a potential value of $4.3
Congressional Research Service
https://crsreports.congress.gov
IN12053
CRS INSIGHT
Prepared for Members and
Committees of Congress](ViewImageLocal?handle=hein.crs/govejnj0001&div=1&collection=&method=preview&ext=.png&size=3)