In an attempt to curb costs, DoD is encouraging beneficiaries to use base and post pharmacies and the TRICARE Mail-Order Program.

SO MANY CHANGES ARE OCCURRING to the military pharmacy benefit that only time will tell us if DoD achieves its dual goals: to improve overall access to no-cost or low-cost drugs for 9 million beneficiaries yet slow military pharmacy cost growth for taxpayers.

The first of two management tools being applied to the benefit is higher copayments for the TRICARE retail network, which understandably will disappoint beneficiaries who fill their prescriptions at local stores. To encourage use of base and post pharmacies and the TRICARE mail-order program, where drug inventories are stocked using federal pricing discounts, copayments in the retail network are set to increase in 2007 to $5 (up from $3) for generic drugs and to $15 (up from $9) for brand-name drugs on the military formulary. Copayments for non-formulary drugs will remain at $22 for a 30-day supply in the retail network and a 90-day supply by mail order.

The government is battling pharmaceutical companies in court to try to apply federal pricing discounts to medicines dispensed through the TRICARE retail network of 54,000 off-post pharmacies. But for now, the retail network is the engine driving pharmacy costs into the red, officials contend.

From FY 2002 through 2005, outpatient drug expenditures through the retail network jumped 147 percent, from $1.28 billion to $3.16 billion. Over the same period, the cost of outpatient drugs on base increased only 16 percent, from $1.39 billion to $1.61 billion. The most cost-efficient point of service, mail order, saw an increase of 81 percent over those four years, from $347 million to $629 million. But mail order captured less than 12 percent of the military's overall drug costs.

The number of beneficiaries who rely solely on retail outlets for their drugs rose by 800,000 in the past four years, while the number using only base pharmacies fell by 400,000. Users of mail order fell, too, by 18,000. Policymakers hope higher copayments in the retail network will reverse that trend. To encourage even greater use of the mail-order option, officials intend to eliminate the $3 copayment for generic drugs filled by mail in 2007.

A second tool used to curb drug costs is the shaping of a uniform drug formulary for the military across all three points of service. So far that process has been deliberate, sophisticated, and surprisingly transparent to beneficiary advocates. As a result, tax dollars have been saved, though no overall figure is available, and perhaps beneficiary worries have eased.

The formulary decision process begins with a team of pharmacists, physicians, and economists at DoD's Pharmacoeconomic Center studying a category of drugs for cost efficiency and clinical effectiveness. The DoD Pharmacy and Therapeutics (P&T) Committee takes the data and, six months after the review began, recommends which drugs to add to the formulary and which drugs are too costly or less effective. A beneficiary advisory panel (BAP) is briefed on the P&T recommendations and either concurs or recommends changes. Dr. William Winkenwerder, director of TRICARE, reviews the BAP comments along with the P&T recommendations and makes a final decision on which drugs will be moved to formulary status. These drugs will be available on bases and posts and at lower copayments through mail order and the retail network.

Sydney Hickey, who chairs the BAP and represents the National Military Family Association on the panel (MOAA's representative is Cmdr. John Class, USN-Ret.), says the uniform formulary no doubt will save money for the pharmacy program. Indeed, she said, the hefty TRICARE fee increases now planned could have been minimized if DoD had been faster in adopting a uniform formulary. Congress ordered the change, after all, in the FY 2000 Defense budget.

Besides lowering program costs, a uniform formulary will expand the selection of drugs that base pharmacies stock and dispense for free. But it also will mean higher $22 copayments for drugs denied formulary status and dispensed off-post or by mail.

That higher cost already is affecting behavior, says Navy Cmdr. Mark A. Richerson, director of the DoD Pharmacoeconomic Center. When Levitra, an erectile dysfunction drug, was named to the formulary last year and Viagra denied the same status, almost 16,000 beneficiaries switched to Levitra within four months.

Defense officials say they are acting to preserve a robust pharmacy benefit but also to be more fiscally responsible. The proportion of pain to gain for beneficiaries will be easier to know a year from now after most of the major drug classes have been through the formulary review process.

Tom Philpott is a freelance writer and syndicated news columnist. His column, "Military Update," appears in 48 daily newspapers throughout the United States and overseas.