Testimony of Captain Charles Hostettler, MSC, USN Director, DoD Pharmacy Programs TRICARE Management Activity Before the Subcommittee on Oversight and Investigations House Veterans’ Affairs Committee US House of Representatives May 25, 2000
Mr. Chairman, Distinguished Members of the Committees, it’s my pleasure to appear before the Committee today and share with you an overview of two very important pharmacy programs. Those two programs are: The National Mail Order program and the joint DoD/VA contracting initiative. The first is the Department of Defense’s (DoD) National Mail Order Pharmacy, or NMOP, program. This program has its roots in a test directed by Congress back in the early Nineties, where DoD was to implement a commercial Mail Order Pharmacy demonstration program in two three-state regions to assess whether such a program was a viable and economic option for supplementing the healthcare provided to DoD beneficiaries. This test was later expanded to include a number of other sites affected by closures of military medical treatment facilities as a result of the Base Realignment and Closure commission actions. We completed an analysis of this test program and concluded it was a viable and money saving program for DoD, especially for beneficiaries who had been getting their prescriptions using the CHAMPUS or TRICARE Managed Care programs. Therefore, the demonstration program was terminated and the National Mail Order Pharmacy program was initiated in October 1997. The contract for this program was negotiated competitively using Best Value techniques, and was awarded to Merck-Medco, the acknowledged leader of the industry at that time. The contract was awarded and is administered by the Defense Supply Center Philadelphia, which has acted as our contracting agent for this program. The contract provides full spectrum pharmacy services, including: validation of prescriptions, verification of eligibility, checking for possible drug-to-drug interactions, consulting with prescribers, managing compliance with the formulary and managing the financial transactions and co-payments. This program provides for home delivery of up to a 90 day supply of maintenance (chronic) drugs with low co-payments and convenient refill procedures. The formulary is managed by the DoD Pharmacy and Therapeutics Committee. Participation in the NMOP program has exceeded all expectations and estimates. Merck-Medco is now filling over 120,000 prescriptions a month and is growing exponentially. In FY99, almost 1.3 million prescriptions were filled for DoD beneficiaries through the NMOP program. As a result of the sophisticated software we have developed to manage this program and the contractually required data we receive from Merck-Medco, we have very accurate data about all aspects of this program. We have found this program to be an extremely useful tool in augmenting our military treatment facility pharmacies and in managing the healthcare requirements of DoD beneficiaries world-wide. The Department of Veterans Affairs (DVA) has a Centralized Mail Order Program (CMOPS). The CMOPS program is a refill mail-out program, i.e. the first time a prescription is filled, it must be filled at a VA facility and subsequent refills are mailed from one of the CMOPS locations. Unlike the DoD’s NMOP which fills new prescriptions and prescriptions written by physicians who are not DoD physicians, the CMOPS fills only refills and does not fill any prescription written by a physician outside the VA system. With the VA’s concurrence, the DoD Pharmacy Board of Directors and I have explored the possibility of utilizing the CMOPS. We have visited CMOPS facilities and have verified that CMOPS has no additional capacity and does not process new prescriptions. If capacity existed, DoD could possibly utilize CMOPS to accommodate some of the MTF refill workload, but clearly could not replace NMOP. A major obstacle to DoD use of CMOPS is the lack of a technology interface and integrated information system between the two organizations. As you know, DoD has been working diligently for the past two years to implement an integrated pharmacy information system within DoD and has begun the alpha testing just this month. The VA has a completely separate system that is not compatible with national pharmacy data transaction standards. Other hurdles include initial capitalization and management control. The second topic I will comment on briefly is the DoD/DVA Joint National Contract initiatives. From my point of view as the Director, DoD Pharmacy Programs, this program has been a great success, delivering millions of dollars in savings and helping to improve and standardize healthcare within the DoD system. National pharmaceutical contracts are closely integrated with formulary management in the Department of Defense. National pharmaceutical contracts are classified as either "open" class or "closed" class contracts. An open class contract involves competition between different companies all selling the same generically equivalent drug. The government agrees to buy the drug from only one company in exchange for a lower price. To illustrate, the joint national pharmaceutical contract with Forrest Laboratories, Inc. for the Tiazac brand of diltiazem extended release tablets is an open class contract. Tizac is in a class of drugs called calcium channel blockers. Military pharmacies may have other drugs on their formularies in the same class as Tiazac, but they cannot have other drugs on their formularies that are generically identical to Tiazac. In summary, if VA/DoD facilities are going to dispense diltiazem, it must be the Tiazac brand. A closed class contract, on the other hand, involves competition between generically different drugs within the same therapeutic drug class. To establish a closed class contract, the DoD Pharmacy and Therapeutics (P&T) Committee must determine that the vast majority of the DoD patient population can be successfully treated with a subset of the drugs with the best clinical and economic value. A process remains in place allowing physicians to justify prescribing a non-contracted drug for patients who cannot take the contracted drug. The DoD contract with Astra-Zeneca Pharmaceuticals for omeprazole (brand name Prilosec) is an example of a closed class contract. Omeprazole is in the proton pump inhibitor drug class. The contract stipulates that omeprazole is the only proton pump inhibitor MTFs and the NMOP are allowed to have on their formularies. A recurring question is: Why can’t DoD and VA contract jointly for all pharmaceuticals under either open or closed class contracts? The decision to contract jointly is dependent largely on the particular drug we seek to procure and our assessment of the clinical requirements. While the DoD and VA have successfully established 18 joint open-class pharmaceutical contracts as of March 2000, it is not feasible or desirable to jointly contract for all pharmaceuticals for the following reasons: a. Open class contracts can be established only when competition exists between two or more companies selling the same drug. If only one company sells a particular drug, there is no opportunity to establish an open class contract. b. Closed class contracts can be established only when the vast majority of patients can be successfully treated with a subset of the drugs in a given class. Closed class contracts must successfully balance two opposing objectives:
Very few drug classes are amenable to closed class contracts because the drugs usually are not therapeutically interchangeable to a sufficient degree for a subset of the drugs to meet the clinical needs of a vast majority of the patient population. c. Closed class contracts are difficult even for a single agency to establish—as evidenced by the fact that the VA has closed only four classes and the DoD has closed only two classes to date. A joint agency closed class contract would be even more difficult to establish because of the differences in physician preferences in the VA and DoD health care systems and in the patient populations. (1) The VA operates a relatively "closed" health care system that resembles a staff model HMO. Under TRICARE, the Military Health System offers its beneficiaries much more choice. DoD beneficiaries can obtain care from MTFs that operate like staff model HMOs, managed care support contractor provider networks (PPOs), or a virtually unlimited choice of providers under the indemnity insurance coverage of TRICARE standard. The greater choice in health care options afforded to DoD beneficiaries causes the DoD pharmacy benefit to be more "open" than in the VA. VA pharmacies do not fill presriptions written by healthcare providers outside of the VA medical system. The DoD National Mail Order Program and retail pharmacy networks fill prescriptions written by providers across the United States and around the world. It is much more difficult to achieve sufficient consensus among this array of healthcare providers that a subset of the available drugs are sufficient to meet the clinical needs of DoD beneficiaries. (2) We also believe that patient expectations among DoD beneficiaries are different than the expectations of VA beneficiaries. Patient choice is one of the basic tenets of TRICARE, and patients’ demand for choice clearly extends to the DoD pharmacy benefit. This demand for patient choice constrains DoD’s ability to easily implement closed class contracts as well or as easily as the VA. Back to Witness List |