▶ 0:15:08>> the hearing gives us an opportunity to examine a critical component of military health care. However it is today, he had a wide variety of experiences from policy over pie -- oversight of the program to beneficiaries using services. I want to thank Dr. david smith, Dr. adam. Is that it? Pretty good. Dr. langford.
▶ 0:15:42As someone who spent decades coaching young men and women, I understand success depends on discipline and access to the right tools. Same principle applies to our military. We cannot expect service members to maintain peak readiness if they cannot rely on access to medications and treatments that they need.
▶ 0:16:08The program serves millions of service members, retirees, and military families where many of beneficiaries access prescription medicines or medications. It's not a matter of convenience. It's essential to managing chronic conditions, recovering from injuries, maintaining mental health, and ensuring overall fitness for duty.
▶ 0:16:29As congress continues to oversee military health care spending, we must strike the right balance between controlling costs and maintaining access. Savings achieved on paper are not real savings if they result in delayed treatment, reduced readiness or additional health care costs down the road. I'm interested in how the pharmacy program supports preventive care, injury recovery , health, and overall readiness.
▶ 0:17:01We should be asking whether beneficiaries can access medications in a timely manner, whether military families in rural communities face unique challenges and whether the department is using modern tools and data to improve it while managing costs. I want to understand how the department is preparing the future challenges including drug shortages, supply chain disruptions, and the growing costs associated with medications.
▶ 0:17:29Ultimately, our goal should be to provide american service members and their families with reliable access to high-quality pharmacy services while being responsible stewards of taxpayer dollars. I think our witness for coming here today and I thank them for their testimony.
▶ 0:17:47We will have senators coming in because we have a lot of committee hearings today so be patient with us but we also have a lot of questions we want to ask so thank you for being here today and now, senator warner, open statement. >> thank you to our witnesses for being here today. The tri-care pharmacy program lacks meaningful oversight.
▶ 0:18:16Since 2020 two, 13,000 pharmacies have left the tri-care network. That means that 13,000 local pharmacies that can no longer fill prescriptions for our service members and 400,000 military families have got to get out there and find a new pharmacy.
▶ 0:18:35The consequences of losing access to your local pharmacy can be think about veterans with complex medical needs who rely on personalized care of a local farm as someone who will check for drug interactions, package medications to maximize adherence, and comfort a caregiver who is overwhelmed by their responsibilities. It is the kind of care we want for our military families and the kind of care that they deserve.
▶ 0:19:05I have letters from 58 pharmacists who speak directly to this issue. Mr. chairman, I request that they be entered into the record. This subcommittee has a responsibility to understand why this kind of care is shrinking in tri-care so we need to look at the contractor who is running this program.
▶ 0:19:29Since 2003, dod has awarded the pharmacy contract to the largest pharmacy benefit manager in the country for 23 years. They have had an exclusive contract with the most recent contract worth at least $4.2 billion in revenues over seven years. So what does it do with billions of taxpayer dollars?
▶ 0:20:00They decide which retail pharmacies are in the tri-care network and what they are going to get paid for a prescription. They process pharmacy claims and they run a mail-order program through express scripts subsidiaries called express scripts pharmacy and a specialty pharmacy. Here is the kicker.
▶ 0:20:24Express scripts both decides the reimbursement rates for its competitors and provides its own pharmacy benefit services. All of the gate spilled to try care.
▶ 0:20:41That seems to me to be a pretty clear conflict of interest and yet dod actually requires the tri-care pharmacy contractor both to own a pbm and its own pharmacy. I do not know who talked them into that but it's an open invitation for express scripts to milk the federal government, to kick out the competition and to steer a lot of money its own way.
▶ 0:21:14The squeeze play is not hard to pull off. In a traditional pbm contract, when the same company owns a pbm and a pharmacy, it can leverage the vertical integration through tactics like spread pricing in which pbm's charge insurers more than what they reimburse pharmacies for a drug or engage in steering in which they under
▶ 0:21:44Reimburse the competitors and send more business to the pbm's own pharmacy. Dod and express scripts are quick to clarify that tri-care pharmacy contract is not a traditional pbm contract so they claim that these proximate -- profit maximizing games don't apply to them. The problem is the facts.
▶ 0:22:09Audits of other government contracts show exactly the same practices but dod wants you to believe there is nothing to see here. Ok.
▶ 0:22:24But if that were true, dod and express scripts should be rushing to provide this committee with proof and yet for three years now, I have repeatedly asked for the terms of dod's contract with express scripts only to be told for three years that what dod pays for prescription drugs is either proprietary or a trade secret.
▶ 0:22:52And that people like the chairman and me whose job it is to conduct oversight on exactly this issue are not allowed to see it. After I pressed the assistant secretary, keith bass, on the department's weak oversight of this contract during a hearing before this subcommittee in may, he committed to conduct an annual review of the contract and to disclose the differences in reimbursement rates and fees between the retail pharmacies
▶ 0:23:23And the express scripts subsidiaries. Nearly two months later, I am still waiting. For those numbers. If dod and express scripts refused to share this data, we can draw only one conclusion. The contract that dod and express scripts want us to believe is so different is not really different at all.
▶ 0:23:46Now, I'm glad that this committee included a requirement in the fiscal year 2027 ndaa taught at this contract. We need to pass that requirement into law. Dod has also begun negotiating the next pharmacy contract which will take place in 2030. I urge dod to flatly prohibit vertical integration in the next tri-care pharmacy contract.
▶ 0:24:15A vertically integrated pbm has every incentive to line its own pockets and dod should not be using taxpayer dollars to fund these schemes. If dod wants to use a pbm, then get one that works exclusively for dod and american taxpayers and not one that is simultaneously trying to increase profits for its parent insurance company. So I look forward to discussing these topics.
▶ 0:24:45Thank you again for having this hearing, Mr. chairman. >> thank, senator warren. Before we start, the subcommittee has received a number of statements for record. Without objection, they will be included in the record. Now, we have four witnesses. Dr. smith, we will start with you but I would like to say this. We have a lot of questions. I read some of your opening statements. They are rather long. Please keep your statements short.
▶ 0:25:12At the end if you want to continue with your statement, we will let you do that but I would like to get to the question because we have said it is here that need to get on to other hearings. We will start with you. Please.
▶ 0:25:25Dr. Smith: Ranking member warren and distinguished members of the committee, thank you for the opportunity to testify before you today. Alongside my distinguished colleagues from the private sector. The department's part to deliver one of the most comprehensive health benefits of any employer in the country to include an exceptional prescription drug benefit offered through three points of service.
▶ 0:25:48Dr. Smith: The military treatment facility, the tri-care mail-order from a c team up which provides home delivery, and the tri-care retail pharmacy network. My written statement provides much more detail as you pointed out, sir. Of the tri-care pharmacy program addressing our contract support as well as how the government directly manages the benefit. I will, however, touch on a few important items that I know are among the greatest concerns you have raised with us.
▶ 0:26:20Dr. Smith: Over 70% of all prescription medications are provided through either mail-order with the retail networks which are managed by the defense health agency through our tri-care pharmacy contractor, ever north federal services. This contract is different from most civilian models for administering prescription drug benefits.
▶ 0:26:41Dr. Smith: It uses a pharmacy benefit administrator or pba model rather than a traditional pharmacy benefit manager or pbm model. Commonly used by many employers and health insurance firms. The defining feature of a pba model is dha pays the contractor a fixed administrative fee bill that retail.
▶ 0:27:09Dr. Smith: The contractor cannot generate revenue from the price of drugs themselves at either retail from price of drugs themselves -- it often controls the formulary placement as another mechanism to drive revenue streams which cannot happen under our contract due to the government's uniform formulary process. The government provides these functions and generates the savings for the program.
▶ 0:27:35Dr. Smith: We are essentially the pbm, saving dollars for the taxpayer. Through this model, the government ensures contract incentives are aligned with pharmacy program goals rather than revenue generated from drug pricing. Dha does recover costs on drug prices directly from the pharmacy manufacturers, not the pharmacy contractor.
▶ 0:28:02Dr. Smith: Thanks to the statutory authority that congress has provided us through the tri-care retail program. For drugs dispensed at retail. The covered refunds are returned to the government and are independent of the contract. Since the program was first introduced, the department has recognized over $22 billion worth of savings and in fiscal year 26, those savings are projected to reach $2 billion.
▶ 0:28:30Dr. Smith: The dha established its access to pharmacy service requirements as part of the contract. The contractor must offer at least one network pharmacy within a 15 minute drive for 95% of all the beneficiaries and maintains a minimum network size of 35,000 pharmacies. Currently, there are over 98% of our beneficiaries who are within a 15 minute drive time. And over 99% that are within a 30 minute drive time.
▶ 0:29:02Dr. Smith: The retail network consists of 46,000 pharmacies, 11,000 higher than the contractual floor. The government has full visibility and control over the cost of the pharmaceuticals dispensed from our mail order programs and the defense logistics agency procures and replenishes through the prime vendor program using the established pricing off the federal supply schedules.
▶ 0:29:26Dr. Smith: Ever north received no reimbursement for the cost of drugs themselves dispensed through it. The government determines the tri-care pharmacy uniform formulary through a physician led department of defense pharmacy and therapeutics committee and the department of war committee develops and recommends drugs for formulary tears, says priority -- prior authorization criteria, and
▶ 0:29:57Dr. Smith: Ensures the pharmacy benefit is standardized across all points of service based on medical needs first and foremost. The government managed model has saved taxpayers over $6.5 billion in fy 25 through federal supply schedule pricing and statutory funds. In conclusion, the dha is proud of the comprehensive worldwide pharmacy benefit it offers to our 9.5 million beneficiaries and similar to the overall U.S.
▶ 0:30:26Dr. Smith: Health system, pharmaceutical costs growth remains an area of intense concern. The department continues to explore approaches that ensure continued, timely access to hard earned benefits and a fiscally dutch in a fiscally responsible manner. Thank you again for the opportunity to address our approach to managing this important program and I appreciate your vital support to the nhs and look forward to answering your questions. >> thank you.
▶ 0:30:59Dr. Smith: >> members of the subcommittee, thank you for the opportunity to appear before you today. I serve as president of express scripts and evernorth care management. We are honored to serve more than 9 million beneficiaries. Service members, retirees, and military families depend on the tri-care pharmacy program wherever they live and serve.
▶ 0:31:30Dr. Smith: Ensuring that they have reliable access to the medications they need is a responsibility we take seriously everyday. I understand the importance of that responsibility personally. I began my career as a hospital pharmacist. Later, when I was diagnosed with stage four melanoma, I experienced firsthand how access to innovative medicines can save a life.
▶ 0:31:53Dr. Smith: Today, the tri-care pharmacy program brings together military, retail, specialty, and home delivery pharmacies. It provides beneficiaries with safe, convenient access to medications. It helps the department manage rising drug costs and it maintains force readiness. Congress established the program to provide consistent coverage to tri-care beneficiaries. Congress sets the structure of the benefit and determines beneficiary cost-sharing.
▶ 0:32:24Dr. Smith: The defense health agency determines what medications are covered and how the program operates. The defense logistics agency purchases medications dispensed through both mail-order and military pharmacies. Our role is straightforward. Execute that design with precision and care. Every day, we are accountable for ensuring patients have reliable access to medicines, that the program operates smoothly and that taxpayer dollars are spent responsibly.
▶ 0:32:55Dr. Smith: We both the broadest network of retail pharmacies across the country at the best possible value for the government and we ensure service members can access their medications no matter where they serve. That responsibility matters. Behind every prescription is a service member, a spouse, a child, counting on us, and a taxpayer who expects this program to deliver value. I am proud to report that the program is delivering strong results.
▶ 0:33:25Dr. Smith: Tri-care beneficiaries currently have access to more than 46,000 network pharmacies nationwide. This exceeds defense health agency requirements by more than 11,000 pharmacies. More than 90% of beneficiaries live within 15 minutes of a network pharmacy and more than 16,000 independent pharmacies nationwide participate in the network. We continue to welcome any independent pharmacy who wishes to join the -- join the tri-care network.
▶ 0:33:52Dr. Smith: Through the mail order pharmacy, we help ensure medications reach service members and their families across the country and around the world. In turn, government pricing generates significant savings for beneficiaries, the department, and taxpayers. Collectively, our work helps the department deliver reliable access to medications for tri-care beneficiaries while controlling costs.
▶ 0:34:20Dr. Smith: This preserves resources for other mission-critical priorities. According to gao, this is one of only two major tri-care contracts that has decreased in costs over time. We operate within the framework the government has established and we are committed to continuous improvement as the needs of the military people. We welcome the opportunity to discuss how we can continue strengthening service for military families and taxpayers. I look forward to your questions. >> thank you.
▶ 0:34:53Dr. Smith: You get bonus points for cutting it down pretty good. Thank you. Dr. lansford?
▶ 0:34:58Dr. Lansford: Members of the subcommittee, thank you for the opportunity to testify before you today. I am a pharmacist and owner of roden-smith pharmacy. In clovis, new mexico. It sits next to cannon air force base, a community of active duty, their dependents, and retirees. We have been able to serve this community for as long as I can remember.
▶ 0:35:26Dr. Lansford: We did up until 2023 when express scripts forced us out of the tri-care program. For years, tri-care beneficiaries could choose the pharmacy that served them best. For most, that was a community pharmacy like mine that provides a higher level of personal care, easier access, same-day medications, packaging, immunizations, delivery, compounding, and a pharmacist that knew their family and their
▶ 0:35:57Dr. Lansford: Situation. Now, many pharmacies like mine have been forced out of the tri-care program. We were pushed out by contract terms that made an already difficult participation impossible, leaving beneficiaries with fewer choices and less access to the care that works best for them.
▶ 0:36:17Dr. Lansford: I reviewed all of the almost 7000 prescriptions refilled in 2022, our last year in the program, and we were reimbursed on average $.37 below the cost of the drug itself without any additional allowance for overhead.
▶ 0:36:38Dr. Lansford: After esi was awarded the contract, they drastically reduced the reimbursement rates such that I would have lost almost nine dollars on every prescription I filled before any other expense. That would have been catastrophic for our businesses viability and for all the other patients that we serve. Prescription care should not be a loss leader.
▶ 0:37:05Dr. Lansford: No pharmacy can continue serving patients under a contract that requires it to lose money on the very care that it provides. The contract had real-life consequences and was felt acutely by the families who live in depend on our care locally. People like a disabled retire airman and his wife and full-time caregiver.
▶ 0:37:31Dr. Lansford: Before each monthly fill, I worked to reconcile changes, identify concerns and ensure his medications still made sense. I can't take care of them anymore. Like the many military spouses holding down the fort at home while they are is deployed abroad.
▶ 0:37:50Dr. Lansford: They used to be able to come through the pharmacy drive-through or pop in for an antibiotic for a child and now they have to wade through security lines trying to get on base pharmacy, hoping the drug is in stock when they arrive or all the elderly retirees that used to be able to come in and dump their problems or confusion quite literally on the counter in front of me, in front of somebody they trusted.
▶ 0:38:15Dr. Lansford: I cannot do that for them anymore and it wasn't just the patients that suffered under this. I had to look each of them in the eye and say I'm sorry. I can no longer help you. Mail order may deliver medication. Community pharmacy is where care is delivered. The stories were not inevitable. They were the purposeful result of network terms esi chose to impose and the conflicts of interest inherent in the system.
▶ 0:38:43Dr. Lansford: Esi decides which pharmacies can participate, how much they will be paid, and the profits when the patient is redirected to one of their specialty pharmacy facilities and then esi supplies most of the data to judge whether or not the network is adequate or if they are successful. The contractor should be allowed to referee a game while also competing in it.
▶ 0:39:12Dr. Lansford: Military families experience the consequences while the content and reports that the system is working just fine. Congress can and should correct this. Require an independent audit, measure real pharmacy access, require transparent and sustainable reimbursement, protect patient choice, and establish conflict of interest safeguards that require a non-vertically integrated manager.
▶ 0:39:41Dr. Lansford: The question is not what military families can tolerate. It's what they deserve. Thank you. >> thank you. >> distinguished members of the committee. I am with american pharmacy cooperative, consisting of approximately 1500 independent pharmacies throughout this country. Grateful for the opportunity to speak. More grateful that Dr.
▶ 0:40:10Dr. Lansford: Lansford had the opportunity to share his experience which matches the experience of thousands and thousands of independent pharmacies across the state. I would meet with this. I would posit that what express scripts did in the tri-care retail network is the poster child for why pbm should not be allowed to own pharmacies. Mail order or retail pharmacies. It speaks to the problems of vertical integration.
▶ 0:40:43Dr. Lansford: The law is complicated. Under current law, federal law favors mail order pharmacies. It is entrenched. It restricts retail pharmacies from filling maintenance medications and in the statute, it penalizes beneficiaries for choosing retail via higher cost-sharing on paper and every chance express scripts cats, every chance they get, they left to tout the savings of mail order pharmacy but here's the thing.
▶ 0:41:12Dr. Lansford: Under dha's own data, it turns out that despite the federal code come over and over again, it is cheaper for a tri-care beneficiary to fill a prescription at a retail farming set -- then it actually is at esi's mail order pharmacy, cheaper on the cost shares.
▶ 0:41:32Dr. Lansford: Stunningly, filling a generic medication at a retail pharmacy and try not only is cheaper for the beneficiaries via lower cost saving, is cheaper for the agency itself according to their own reports year over year over year. Generic medications on average are cheaper at retail pharmacies . In 2018, they were cheaper by 85% on average for 30 days generic medication so what happens?
▶ 0:42:00Dr. Lansford: Why on earth would express scripts want to call between 13,000 and 15,000 retail pharmacies from the network under the auspices of cost saving? I would posit, and if you're anything like me, and I know I would posit you look at their self interest. Look at the vertical integration. Dha's own data shows that between 2018 and 2022, esi's mail order pharmacy in a tri-care network last about 9% of utilization. 9%.
▶ 0:42:30Dr. Lansford: Beneficiaries were choosing retail pharmacies to get the care that they deserve so what does express scripts do? A call around 13,000 retail pharmacies from the network. Right? The gao figure was around potentially 380 beneficiaries that lost access to their pharmacy of choice but you know who winds? Express scripts mail order pharmacy, owned by express scripts. That is the only winner here. The only winner here and I want to talk a little bit more about the retail pharmacy network and I will be quick.
▶ 0:43:00Dr. Lansford: Express scripts loves to say this program is different. There is nothing to see here. We operate differently. First of all in federal pleadings, express scripts does not call themselves a ppa for tri-care. Additionally in court filings, express scripts has said that they manage the retail pharmacy network in a manner that is indivisible and indistinguishable from their other networks including the federal employee health plan.
▶ 0:43:30Dr. Lansford: In court filings, there is no difference with how they manage that program. That is stunning and it's damning. The office of inspector general has looked at express scripts practices in their retail network for two federal employee health plans and you know what they found? They found the books did not match.
▶ 0:43:51Dr. Lansford: They found that the drug prices they reported to the federal employee health plan clients did not match the lower reimbursements they were negotiating with retail pharmacies to the tune of $18 million. That tells you two things. One, they got two sets of books and spread pricing is alive and well. The express scripts retail tri-care pharmacy network. The good news is there's things that we can do.
▶ 0:44:17Dr. Lansford: I think dha should engage in an expensive audit using the office of inspector general with an interagency agreement with the office of personnel management's office of inspector general. They looked under the hood and they know where the bodies are buried.
▶ 0:44:33Dr. Lansford: Certainly the contract can be improved to prohibit vertical integration at the clues these loopholes and lastly, legislation is in order to remove the entrenched favoritism toward mail order pharmacy, increase patient choice, and take away the ability of express scripts to manipulate drug prices by moving to a market-based index. Thank you, chairman. >> let's get those out and see if we can make it better.
▶ 0:45:02Dr. Lansford: I am on the health committee and I heard a lot about this over the years so this will be good. I am going to yield my time. He knows more about health care than anybody up here. Senator scott. >> thank you, chairman. My background is I have 25 thousand employees.
▶ 0:45:26Dr. Lansford: I also owned at one time when I was running a hospital company the third-biggest pbm and then I was I think the largest shareholder in the pharmacy chain trying to make money where things were moving to mail order, not just drugs but everything was moved to mail order. I have been in your position.
▶ 0:45:54Dr. Lansford: Before I get to the new pbm, can I just ask you a very simple question? How many fighter jets does america buy from china? Do you know of any warships? It seems like a pretty stupid example to buy from them, wouldn't it be? They are our adversary. >> yes, sir.
▶ 0:46:19Dr. Lansford: >> at the same time, we buy drugs from them every day and it's my understanding that we -- part of the reason we do not buy fighter jets or were from china is because we don't want to be reliant on them and we probably could save some money, right? Probably might do it cheaper so why are we continuing to buy chinese drugs when we don't want to rely on them for fighter jets or anything else?
▶ 0:46:47Dr. Lansford: >> we are well aware of some of the dependencies that are in the system that we have had this discussion with a number of view, the national security concerns that we have. And I believe we try to only by taa compliant drugs which is part of the reason for the difference in the generic pricing depending on where you are for the venue.
▶ 0:47:12Dr. Lansford: But we are doing a number of different efforts to try to shore up that chain and next year, in that president's budget, you will see funding that is dedicated to trying to do a number of efforts relative to shoring up that supply chain. >> Dr. smith, part of your job as you want to make sure that every -- they can get the drugs they need.
▶ 0:47:40Dr. Lansford: And you want to get the best price you can because its taxpayer money, right? So you are trying to do both of those. Under the contract with express scripts or ever north or whatever it is, how are they paid? Do they have a profit incentive? Were they making money off the drugs? Do they get a set fee and you set the price of the drugs?
▶ 0:48:04Dr. Lansford: >> the basic way it works, it's complicated because there's three different pieces to this but relative to the mail order pharmacy, they get basically a fill fee from us. They use the federal pricing and our negotiations directly with the manufacturers.
▶ 0:48:33Dr. Lansford: So we replace in-kind anything used by their mail order pharmacy and then they get an administrative fee for that sale. On the retail side, we rely on the network that they built both for their commercial business and also for our business and they have provided in the contract a network discount guarantee for us. If they do better than that, there's incentives for them. If they do less than that, then they basically have to make up the difference.
▶ 0:49:02Dr. Lansford: And we are the ones that go out and get the refunds based on the tri-care -- the exact name is the retail refund program that you all authorized us and we have that so that brings it back down to federal supply and then our pharmacy and therapeutics committee also works with manufacturers on volume discounts and we will go after additional discounts to save money but none of that, and this
▶ 0:49:34Dr. Lansford: Is a distinct difference with all of the other plans that we were referring to, it does not go through ever north and comes directly from us back and forth and ever north, one more thing, sir. On the team come on the retail network, they are using direct government funds to pay the bills to the pharmacies. >> you decide the price.
▶ 0:50:06Dr. Lansford: You are buying the drug. Do you say the co-pay was for tri-care? >> that is set by you. >> so it's not set in the co-pay? >> certainly do not.
▶ 0:50:25Dr. Lansford: The pricing within the network paid to the pharmacy as part of it's work and then we come back and get refunds for the pharmaceutical companies for the price that is above just to be clear on that. >> you use, whether it's express scripts or something else, do you use mail order because it is cheaper? >> the advantage is multi fold.
▶ 0:50:56Dr. Lansford: What is that it is convenient for the person that needs to get their drugs on a recurrent basis but we also buy all the drugs for mail order so that makes it significantly cheaper than what it costs in the retail network. >> is a consumer mandated to use mail order?
▶ 0:51:19Dr. Lansford: >> if they are for brand name drugs, they are after two fills in the retail network and we asked them to move over. >> that is what you make because you can save money. How many pharmacies are there in the country? >> senator, there are over 60,000 retail pharmacies in the country. >> how many do you contract with on behalf of the department?
▶ 0:51:53Dr. Lansford: >> we contract over 46,000 to 11,000 more than the minimum that is met in the contract. >> when he loses the contract, what is the typical thing? Why does that happen? Why does it serve ever north? Once we have 16,000 plus independent pharmacies that you participate and have chosen to serve as tri-care beneficiaries in our network today. We do go out and contracts.
▶ 0:52:22Dr. Lansford: We want to have as many pharmacies in our network as we possibly can. We would like to have an even broader network than what we already have so we cover over 98% of beneficiaries within a 15 minute drive time today which exceeds the standard within the contract. It depends on where the pharmacies are located.
▶ 0:52:40Dr. Lansford: Certainly those that are in very rural areas, we make -- we may contract with them even differently because there is an unmet need and a gap we need to fill so depends on the location of the pharmacy at how many other pharmacies are rounded that a beneficiary will have access to. >> can I ask one more question? If you did not work with express scripts on their mail order, you could contract with somebody else, right?
▶ 0:53:09Dr. Lansford: You could contract with another pbm company, right? There is no reason you had to do with express scripts? >> it is a competitively bid contract each time. >> senator warren?
▶ 0:53:23Sen. Warren: Thank you, Mr. chairman. Insurance companies often contract with the pharmacy benefit manager to manage the prescription drug coverage and at least in theory, the way it is supposed to work is the pbm would work for the insurance company and for the people who have insurance with them.
▶ 0:53:46Sen. Warren: Pbm's have gotten caught doing all kinds of good we already mentioned several times today it was in much of your testimony, spread pricing. That is when the pbm reimburses an independent pharmacy, not its own subsidiary, by an independent pharmacy. $70 for a drug, and then bills the insurance company $100 for the drug. And then secretly pockets the $30 difference. That is spread pricing we are talking about today.
▶ 0:54:18Sen. Warren: Dear d and express scripts say the tri-care pharmacy contract is not a traditional pbm contract. It's a purely administrative contract. They claim that express scripts follows dod directions and passes all of the savings through to dod meaning there is no spread here. What you pay go straight on through and that is how we protect the taxpayer.
▶ 0:54:45Sen. Warren: I talk contract law for many years so what I want to see is not how dod summarizes this contract or how the pbm summarizes this. I want to see what the contract itself actually says. I wanted to see it but dod refuses to release the contract with express scripts.
▶ 0:55:08Sen. Warren: However, I have a copy of the contract that express scripts told the pharmacies that they would have to sign in 20 or they could not get any reimbursement and be part of the system. You want to be part of it, you have to sign this so I just want to take a look at one of those terms.
▶ 0:55:30Sen. Warren: Section three .5 states that express scripts maintains the right to aggregate reimbursement reconciliation and offset methodology. So tell us, does this mean that express scripts can adjust what they pay pharmacies after a claim has been processed?
▶ 0:55:59Sen. Warren: >> I appreciate the question, center. I have not reviewed that document and so that is a piece I would have to take back and evaluate to be able to give you a comprehensive answer on. If you are referring to things like clawbacks, we don't engage in clawbacks.
▶ 0:56:15Sen. Warren: I am referring to exactly the contract that you're pharmacy required them to sign if they wanted to be part of the network. -- you required pharmacies to sign if they wanted to be part of the network. You told the dod, in my example, that it was a $100 prescription, you could readjust that price with the pharmacy after the fact, say down to $70 just sticking with the same example. Is that what that phrase means?
▶ 0:56:45Sen. Warren: >> senator, as we covered today, the contract is a full pass through.
▶ 0:56:50Sen. Warren: That is what I am trying to look at. I am just looking at the language of what you tell the independent pharmacies who show up. Let's ask the lawyer what it means. Mr. ribald, you have been dealing with these contracts for a long time. Express scripts is supposed to reimburse the pharmacy at a predetermined price, $100 in my example. Is that what this contract language says? >> thank you, senator warren.
▶ 0:57:20Sen. Warren: If I heard you correctly, you said the contract language references aggregate reconciliation and offset methodology. In 20 years of practicing law, that might be the biggest smoking gun document I have seen in the hearing.
▶ 0:57:38Sen. Warren: What that means is they get to do post adjudication offsets so what they reimburse at the point of sale, they get to move it around and with all due respect, you know, my understanding is for years, he was over retail pharmacy networks so this term should not be a real surprise to him but I would say is this.
▶ 0:57:56Sen. Warren: When you take that provision which gives them the right to move money around after the fact across plans, it's essentially we are talking about a complex shell game, talking about a fortune 20 company playing a shell game you see on the street corner in any city and you combine that with the fact that in their own core admissions, they admit they administer their retail network in a manner indistinguishable and indivisible from the other networks and we know the oig found in pass-through contracts
▶ 0:58:27Sen. Warren: With federal employee health plans that the spread pricing was there.
▶ 0:58:29Sen. Warren: Let's follow through on that because the contract shows that express scripts can do spread pricing in tri-care notwithstanding what dod keeps telling us. It's right there in the contract. It turns out that express scripts has been caught doing exactly that in other government contracts.
▶ 0:58:52Sen. Warren: An inspector general audit of the federal employee health benefit compass rose plan found that express scripts overcharged the government millions of dollars by failing to pass through all retail pharmacy discounts and another inspector general audit of the american postal workers union house plan found millions more in unallowable spread price. They have been caught with their hand in the cookie jar on this.
▶ 0:59:22Sen. Warren: Still, dod claims for tri-care, all savings, meaning the difference between $100 and $70 that you are getting, Dr. lankford, go directly back to the government, to dod.
▶ 0:59:38Sen. Warren: When express scripts exercises section 3.5 and retroactively reimburses -- retroactively lowers the reimbursement rates, are you contractually bound to pass that money through back to the dod? >> appreciate the question, senator.
▶ 1:00:06Sen. Warren: Our focus is administering the contract with dha, 100% pass-through.
▶ 1:00:10Sen. Warren: Your testimony today that when you tell Dr. lansford that he's only going to get $70 and you already told the dod that it costs $100, you get $30 back, are you telling us that every penny of that gets sent back to dod? Is that your testimony today? >> senator, we don't engage in spread pricing.
▶ 1:00:39Sen. Warren: This is a different type of contract with --
▶ 1:00:43Sen. Warren: You have an easy one word answer here and that is you are returning every penny when you retroactively adjust prices. Is that your testimony today? >> senator, this is a pass-through arrangement contract that pertains to the fact that this is a pass-through arrangement contract.
▶ 1:01:08Sen. Warren: If this is a pass-through arrangement, would you support an independent public audit to verify that you are complying with the pastor? >> we are honored to be able to serve the beneficiaries on the government's business is very important to us.
▶ 1:01:36Sen. Warren: You would support an independent audit to verify that every penny is going back to the government? And you are not using this plausible contract, is that right? >> if congress and dha would like to do those --
▶ 1:01:54Sen. Warren: We had the oversight committee here. This is my job, oversight. Will you agree to an audit? >> our company will comply with what congress and dha say we need to do.
▶ 1:02:07Sen. Warren: Dod and express scripts say there is no spread pricing in the tri-care contract with the same language express scripts used to bilk other government plans out of millions of dollars is also present in tri-care. We may well find that express scripts is playing the same games in tri-care or not but we cannot tell without an independent audit.
▶ 1:02:35Sen. Warren: I am glad we have a provision in this year's ndaa that will require an audit here but frankly, I am pretty outraged that you drag in billions of dollars from taxpayers and that you will not submit to an audit when it's clear that you have the opportunity to bilk the federal government and you have used that opportunity in other circumstances so thank you, Mr. chairman. I appreciate the time.
▶ 1:03:06Sen. Warren: As a pharmacist who previously participated in tri-care network , can you walk us through the factors that lead to that decision, specifically what challenges did you face regarding reimbursement rates, administrative requirements, and other aspects of the program and what changes would be necessary for your pharmacy or others like it to rejoin the network? >> thank you for the question, senator.
▶ 1:03:35Sen. Warren: The direction of the industry has been unsustainable for a long time. Pbm's in their vertically integrated organizations take every opportunity to underpay and compromise the local health care networks that already are in place and exist.
▶ 1:03:53Sen. Warren: In this particular instance, it would have become the worst contract that we would have been a part of, only second to new mexico medicaid at the time which later went on to recognize the problem with about half of the rural pharmacies in the state closing over a short timeframe and they pass legislation, fixing it, a model that supports pharmacies staying in business. >> very good.
▶ 1:04:25Sen. Warren: From the perspective of the independent pharmacy community, with the most significant pharmacies face participating today, how have those challenges affected beneficiary access to pharmacy services?
▶ 1:04:40Sen. Warren: >> what I would say and just to follow-up what I said earlier, when you are vertically integrated -- when you have the pbm that also owns the mail order pharmacy and just to set the record straight here, what happened is they went to dha in the 2022 and they asked to reduce the pharmacy network by up to 15,000. They got that permission and they wielded underwater reimbursements as a sword.
▶ 1:05:11Sen. Warren: They wielded underwater reimbursements to purge roughly 13,000 retail pharmacies from the network. 13,000 competitors on the heels of in fact them losing 9% utilization for the mail order pharmacies between that 2018 and 2022 so I think that in and of itself is damming and the other thing I think is just so important to understand here is when you have these vertically integrated pharmacies and they
▶ 1:05:42Sen. Warren: Are engaging in these practices that favor their mail order pharmacy, it is so tricky because the statutory code says, and bear with me here really quickly, I will be fast. The statutory code essentially says, hey, if you want to use a mail order pharmacy, you are going to pay a $14 co-pay.
▶ 1:05:58Sen. Warren: If you were to use a retail pharmacy, you are going to pay a $16 co-pay for 30 days times three so in the code, it looks like using a retail pharmacy is over 200% more than using a mail order pharmacy but in practice, here's what esi is doing. We are reimbursing their mail order pharmacy over and over and over again at the statutory ceiling of $14.
▶ 1:06:22Sen. Warren: They are reimbursing retail pharmacies sometimes as low as $.65 a prescription so it is telling beneficiaries, hey, mail order is cheaper. Mail order is cheaper. When you look at their data, the mail order pharmacy can be as much as sometimes even 1000% more so they love to tout the savings of mail order but the way they have implemented this system, esi is not giving the best prices to the mail order pharmacy, not even giving it the best prices on the block.
▶ 1:06:52Sen. Warren: We have data in georgia that is required to be filed and we have beneficiaries in commercial plans were getting far better deals than they are mail order pharmacy. On top of the $14 cost share, they are also getting an admin fee. I don't know how much that admin fee is. I would sure like to know. Thank you, >> chairman. Thank you, Mr. chairman.
▶ 1:07:19Sen. Warren: I appreciate you allowing a nonmember of the subcommittee, but a member of the committee to join you today. You will have to pardon me because this doesn't make sense. Mr. smith, what is the purpose of the contract with esi? What does the contractor? What are you buying? >> the contract is basically pharmacy benefits administrator.
▶ 1:07:49Sen. Warren: What they do is they help us with providing the retail network. They also provide our mail order pharmacy -- >> your mail order pharmacy. Is it yours? Is it the government's mail order pharmacy? >> we are the ones I contracted for it so it's reasonable to say it's -- they own the mechanism for the mail order pharmacy. We tell them how to run it.
▶ 1:08:21Sen. Warren: >> isn't the mail order pharmacy one of your lines of business? >> senator, the government buys the drugs through a replenishment model. We just do the physical dispensing of those within our facility and we are paid a flat fee to do that. >> you are paid a fee per prescription?
▶ 1:08:49Dr. Kautzner: We are paid a fee to adjudicate the prescription. For that, we are paid a flat fee and we do nearly 18,000 safety quality benefit checks on every prescription. Additionally -- >> what I am puzzling here is you have got somebody who you are hiring to manage the distribution of drugs who also was in the drug distribution business and there is an inherent conflict of interest there, it seems to me.
▶ 1:09:20Dr. Kautzner: I am a country lawyer from brunswick, maine. I don't get this arrangement. >> they don't own retail pharmacies. >> why wouldn't they come in every case, do whatever they could to move people toward their business as opposed to these independent pharmacies? >> in general, we are trying to move them to mail order. For us, it is a cheaper venue.
▶ 1:09:49Dr. Kautzner: Our goal -- make sure that beneficiaries -- >> is there data that validates what you just said, that drug x is cheaper than beneficiary y -- >> because of some of the restrictions of their mail order pharmacies don't have to have that are not serving us to my for example, taa compliance, that means often, they can buy much cheaper chinese generics and other things.
▶ 1:10:18Dr. Kautzner: So when you do it on a drug by drug comparison, there are places we pay a little bit more. But -- >> -- also has a drug distribution arm of their own company. Am I missing something here? >> we are the ones that actually provide the drug to them for the mail order pharmacy. Drug distribution is not relevant here. We are providing the drugs and they are simply packaging it and sending it to the beneficiary.
▶ 1:10:50Dr. Kautzner: >> they also manage this network of independent pharmacies. They got business x over here in 15,000 business y's over here. Why wouldn't they steer them to the one where they get a fee every time? This contractual arrangement makes no sense.
▶ 1:11:12Dr. Kautzner: >> sir, it is very complex but the mail order -- the $14 fee, that is not what it costs on the retail side. We have -- the co-pays are set with congress. We have a higher price on the retail side because it costs ultimately more for us because we are not supplying the drug at the price that we can supply it. >> at I just crazy?
▶ 1:11:43Dr. Lansford: I respectfully disagree with dha's data. In your annual reports, you know generic medications are cheaper year-over-year at retail pharmacies than they are at the mail order pharmacy. In 20 18 by as much as 85 percent. You also notice that your theory of why beneficiaries continue to choose retail pharmacies over express scripts mail order pharmacy is because express scripts uses a lesser of logic.
▶ 1:12:11Dr. Lansford: What that means is that they are setting the co-pay for beneficiaries at $14 at their mail order pharmacy when it may cost a beneficiary as much as $.65 at a retail pharmacy. I absolutely dispute the notion that for generic medications, it's cheaper. Your own data disputes that. >> that is where it has to be apples to apples. >> let me change the subject.
▶ 1:12:41Dr. Lansford: From a very rueful state. Something like 45% of people in the state are in pharmacy deserts. That is a real problem. Dha does not audit the information about access that is provided by the company. Is that true?
▶ 1:13:05Dr. Smith: No, sir. That is not true. We had guide health consulting to an independent audit of the access numbers that ever north -- evermight have been providing us. -- evernorth has been providing us. >> final concern. Two other concerns. One is the differential for reimbursement.
▶ 1:13:35Dr. Smith: If by definition, the reimbursement is -$9 for an independent pharmacy, that is a model for getting rid of all independent pharmacies.
▶ 1:13:43Dr. Smith: When we looked at it, the price is basically about comparable across the independence and what we are doing the -- independents and what we are doing with the chain drug. Evernorth is what deals with it. I am not sure I understand because at least on balance, that's what we see in the data.
▶ 1:14:12Dr. Smith: Now, I will say if there's a fair number of pharmacies in the location and clearly, one with the best pricing is the one that potentially ends up being in the network but I cannot speak for that. That is really what we rely on them to do for us. >> one final note. I am concerned about the coast guard. We have a number that are very remote. Access is a significant problem and I hope that is something that can be addressed.
▶ 1:14:42Dr. Smith: Yes, sir. We certainly are aware of that. In the great state of maine and wisconsin, there's a number of places where c1 we were closely with them.
▶ 1:15:00Dr. Smith: Our partner has been very good that when we point out when there is an area with access issues, with pharmacies in the area, often they wind up in network. >> [indiscernible] how often? >> this one started in 2023 and the next round will be in 2029. >> thank you, senator king.
▶ 1:15:30Dr. Smith: Without taking any warm-up pitches, I'm going to throw senator smith into the game.
▶ 1:15:35Senator Smith: Thank you, Mr. chairman. Admiral, do you prefer admiral or doctor? >> I think admiral or dave works also. >> when I was attorney general people would call me general and I was really uncomfortable with that. I'm going to call you admiral.
▶ 1:16:02Senator Smith: Admiral, I wanted to ask you a few questions on the pharmacy side. In your view, what unique capabilities does the mail-order pharmacy provide to the department? >> on the mail-order side, it provides convenience to our folks.
▶ 1:16:25Senator Smith: It does provide, we are worldwide organization, so they will send to apo and fpo addresses along with adjusting the medications for deployment to make sure that actually get the drugs that are required for that period of time. They are very helpful in that side.
▶ 1:16:50Senator Smith: We also have it set up to where we supply all of the drugs using fss pricing or better.
▶ 1:17:00Sen. Smith: It may seem like an obvious question but I think worth asking, given the nature of this committee, how do you think, how do you view this as a component of readiness? >> I think it is critical. We talked about the worldwide distribution of our personnel and the fact that our partners help us with that.
▶ 1:17:26Sen. Smith: We have to make sure that we have that logistics chain if you will. Additionally having good access means that I can start the drugs sooner and hopefully have a result in making it more fit and deployable sooner. Having a robust pharmacy benefit is what we clearly want to have.
▶ 1:17:58Sen. Smith: But we also want to be cognos and of the pricing of the pharmacy and make sure we are getting best value for the taxpayer.
▶ 1:18:04Sen. Smith: Has expressed groups performed well in that regard? >> yes, sir.
▶ 1:18:10Sen. Smith: How do you measure success as it relates to it? >> we have a whole number of criteria that we look at, everything ranging from claims accuracy to our customer satisfaction rates and they routinely run in the 90%'s. So we think that certainly my impression is that the contract is great value.
▶ 1:18:40Sen. Smith: When congress established the tri-care pharmacy benefit, my understanding is that envisioned multiple points of service. Retail, facilities, mail-order, how have you seen utilization shifts? >> it has waxed and waned incrementally.
▶ 1:19:09Sen. Smith: Over time, you know that access has increased somewhat with our continually rationalizing system. But recently retail has bumped up in a big part of it is the fact of generic pricing.
▶ 1:19:27Sen. Smith: When we buy the drugs, we have to be compliant so at times we can't buy the generic coming from china or india. If I go into a retail network I pay whatever that cost is versus the set co-pay.
▶ 1:19:50Sen. Smith: Flexibility is obviously important so people have different ways to access. How you express -- ss x grep -- express scripts capability as they demonstrated for people to access pharmaceuticals or drugs in a flexible way? What have they done that has impressed you? >> first of all, it is just the access.
▶ 1:20:18Sen. Smith: We went from a mileage to an actual time because I think that is much more realistic as to what it really takes. When you look at how accessible we are, I think that is one of the strongest right. That we see with what they have put together for us.
▶ 1:20:41Sen. Smith: Well, the pitch caucus run, Mr. chairman but I want to thank you for your time and your testimony. [laughter]
▶ 1:20:53Adm. Smith: That's fair.
▶ 1:20:54Sen. Smith: I'm still in my first term, forgive me.
▶ 1:20:57Chair Tuberville: Senator blumenthal.
▶ 1:21:00Senator Blumenthal: Thank you, Mr. chairman. Dr. kautzner, maybe you can explain when express scripts makes formulary decisions, do the manufacturer rebates have a role?
▶ 1:21:21Senator Blumenthal: >> senator, I appreciate that contract and this is one area where normal operations for an employer is different than what we do for dha and tricare beneficiaries.
▶ 1:21:37Senator Blumenthal: So in this instance dha makes all clinical decisions on formularies, prior authorizations and those types of things, so they make all the clinical decisions, they also negotiate all of the drug discounts and rebates for those products.
▶ 1:21:56Senator Blumenthal: We simply adjudicate the prescriptions and ensure that there is a high clinical quality and safety on those prescriptions and in some cases we may dispense those products through our tricare mail-order pharmacy and if that is the case, pay the flat dispense fee.
▶ 1:22:12Sen. Blumenthal: See you are saying for tricare, the formulary is unaffected by manufacturer rebates.
▶ 1:22:21Dr. Kautzner: I am saying for our portion of what we do in our portion, we are not involved in those decisions or processes. All that is done by dha.
▶ 1:22:34Sen. Blumenthal: Do they affect other decision-makers? The manufacturer rebate?
▶ 1:22:42Dr. Kautzner: In terms of tricare, I couldn't speak to what logistics decisions may be made around referencing of those drugs and in this instance we are the contractor and we are focused on providing broad access, clinical quality, and service, and also value to the beneficiaries and taxpayers.
▶ 1:23:06Sen. Blumenthal: Well, one reason I ask is as you know, finding the right mental health medication can sometimes take months or even years.
▶ 1:23:26Sen. Blumenthal: Once a patient has found a patient has counterproductive treatment, disrupting it can have serious consequences and there are concerns that pharmacy benefit managers are changing medication regimens even when their mental health is stable. Have you encountered that concern?
▶ 1:23:46Dr. Kautzner: In practice, I have encountered those types of concerns and it is a piece we take seriously for patients that are on mental health drugs, their stability on those drugs and once they get on a drug that works for them because many of those drugs do have unique side effects that once you are able to tolerate those on a product that you are able to stay on the product, be able to refill the drug as you need to for those types of medications, but in these instances around these
▶ 1:24:17Dr. Kautzner: Clinical decisions for the tricare contract, those are left to dha to make those decisions and we carry those out.
▶ 1:24:23Sen. Blumenthal: Let me ask you, Dr. smith, does dha monitor would've formulary changes or coverage decisions result in disruption or interruption in the mental health care treatment of a patient?
▶ 1:24:37Sen. Blumenthal: >> sir, as you are probably aware we have a pharmacy and therapeutics committee and they meet periodically to review all the new drugs that come out from fta, but also every corner go through classes of drugs to figure out placement within the formulary.
▶ 1:25:02Sen. Blumenthal: And we have primary, when there are drugs that have similar effects, we will choose one to be one of the primary formulary but that doesn't mean I don't have access to the others with prior authorization and some paperwork as a provider that I need to do. So I think it is fair to say that our beneficiaries have wide access to what is required of them.
▶ 1:25:32Sen. Blumenthal: What is the single most important improvement that you could see being made in the health care system?
▶ 1:25:44Dr. Smith: Um, for the overall system, clearly we are in a similar situation to the rest of the country, which is being able to attract and retain our health care staff and we clearly have on the civilian side some constraints because of the amount we can actually pay, and
▶ 1:26:20Dr. Smith: So my biggest issue is the personnel issues that we are competing with everybody else in the country and their are clearly substantial manpower shortages in the health care industry.
▶ 1:26:34Sen. Blumenthal: Thank you.
▶ 1:26:37Chair Tuberville: Next, Mr. chairman. Thank you, senator. I have a question for everybody and we will take about a minute each. What role can pharmacies play in improving medication and helping beneficiaries maintain healthier lifestyles? You've got about a minute.
▶ 1:26:55Mr. Reybold: Thank you, Mr. chairman. Retail pharmacies are among the most accessible health care providers in the nation. They are accessible in inner cities which can also have pharmacy deserts and they are some of the most accessible providers in rural.
▶ 1:27:15Mr. Reybold: Access to retail pharmacies in studies improves medication adherence and outcomes and leaning into that and all the outcomes and what pharmacists have to do makes sense from a policy perspective and will improve outcomes and ultimately reduce costs. That said I would greatly defer to Dr. lansford in that regard.
▶ 1:27:45Dr. Lansford: You know, I think retail pharmacy is special in this country. In every state it is an uncompensated component. There is no data on that happening but it happens all day long every day.
▶ 1:28:13Dr. Lansford: One thing I find really compelling is I overheard that esi is receiving a flat fee for services that they do not have to pay for and I can't help but ask the question what that fee? I might take that deal instead of express scripts if it were offered to me.
▶ 1:28:32Chair Tuberville: Dr. kautzner?
▶ 1:28:34Dr. Kautzner: Mr. chairman, we put a great deal of effort into the clinical side of the work and working to help tricare beneficiaries, military families , and retirees, so we would focus on continued focus on adherence and helping patients refill those medications from an automatic perspective so they don't have to think about it so once they are on the drugs that work for them those will continue to arrive either from a
▶ 1:29:06Dr. Kautzner: Mail-order perspective or from a retail perspective. One of the things we have recently done as part of this new contractor dha is implemented a clinical insights hub. With pharmacy being the most utilized benefit, this hub allows us to pre-identify patients that have complex conditions where they may have the potential to worsen with those conditions. We can intervene on that patient's behalf and help them get healthier and prevent them from regressing with the disease state.
▶ 1:29:35Dr. Kautzner: It has been a nice win for the organization to work with dha and help tricare beneficiaries stay healthy and prevent conditions from getting worse.
▶ 1:29:43Chair Tuberville: Dr. smith?
▶ 1:29:44Dr. Smith: I agree with actually everything that has been set relative to making sure that the pharmacists are critical component of making sure that our beneficiaries are actually educated about the drugs that they have along with obviously there providers.
▶ 1:30:10Dr. Smith: We also worked a number of, they are keyed to us working for example antibiotics to prevent unnecessary use and I think there they are aware that there is multidrug resistance and I think we are engaged in this
▶ 1:30:40Dr. Smith: Actively.
▶ 1:30:41Chair Tuberville: Senator warren?
▶ 1:30:43Senator Warren: Thank you, I want to dig in a little bit more on the comparison between the mail-order pharmacy price for a drug and what an independent pharmacy charges. So dod and express scripts say repeatedly, it is in all your stuff, that the mail-order program saves money. But dod actually reported data to congress on this in fiscal year 2023. That is the most recent we've got.
▶ 1:31:16Senator Warren: Dr. smith, did filling a 30 day supply of generic drugs at express scripts cost dod on average more for laughs than filling the same prescription at a retail pharmacy? Dr. smith: ma'am, I'm going to actually take that one back.
▶ 1:31:38Sen. Warren: You don't have to, I have it, it is the dod report on this and the answer is that express scripts cost 12.5% more than the retail pharmacy when you put them altogether on the generic drug's day supply. So I want to dig just a little bit into how that could happen because the way you describe the business model, it shouldn't be able to happen.
▶ 1:32:06Sen. Warren: So where does the money come from that goes to the different parts here? One is a flat administrative fee on every claim that mail-order pharmacies process and one lawsuit alleges it is $17 that express scripts get per
▶ 1:32:37Sen. Warren: Prescription. Let's look at it for military families. The tricare express scripts website claims military families will save money by using at-home home delivery. Federal law states that for all non-active-duty tricare beneficiaries, the co-pay for generic drugs is $14 with mail-order versus $16 at retail.
▶ 1:33:02Sen. Warren: So I'm sitting there, military member, and I say it is a two dollar difference in the retail pharmacy is more expensive. Let's pause for a minute. Lots of generic drugs cost less than $14. So dod requires Dr. lansford and altogether independent pharmacies to use a lesser of requirement.
▶ 1:33:30Sen. Warren: Under a lesser of requirement that is part of your contract with dod, if a drug costs three dollars, how much do you charge the patient? $16 or three dollars?
▶ 1:33:45Dr. Lansford: Well, the pharmacy benefit manager would decide that and it would actually be the lesser of.
▶ 1:33:52Sen. Warren: That's right. So you only get three dollars if it costs three dollars, that is actually the law. But what about express scripts? I have an explanation of benefits right here that shows mail-order pharmacies charge beneficiaries the full $14 co-pay even when the cost of the drug is cheaper.
▶ 1:34:24Sen. Warren: So there is a big difference in what the customers actually paying on the cheaper drugs. And a diss -- in the difference to the co-pay, maybe $17 on every prescription filled, that means a three dollar prescription but does it cost three dollars, can earn express fees can earn a $14 co-pay from
▶ 1:34:56Sen. Warren: The customer from our servicemember and a 17 member administrative fee from the federal government. Express scripts is supposed to save money for dod, did -- but it appears to me that it costs more.
▶ 1:35:19Sen. Warren: It raises a question that is really bothering me the senator king way was asking about, why on earth is dod requiring vertical integration so that the very company that is supposed to be doing the managing also owns this pharmacy that is competing with our independent pharmacies and in fact we have the data, charging more at least in some
▶ 1:35:50Sen. Warren: Of the cases, charging our servicemembers more and charging our federal government more. Do you think, Dr. smith, that maybe it is time for dod to revisit this requirement of vertical integration and in fact considering saying, no, you only work for the federal government and there is no vertical integration? That is you do not own your own pharmacy at the same time you are trying to manage pharmacy claims for the united states government?
▶ 1:36:18Dr. Smith: Ma'am, using the generic example is a little bit problematic. Because the real cost drivers are the brand-name drugs in the specialty drugs. Over I believe 56% of my costs come from 1% of my prescriptions. I do think the generic question needs to be looked at.
▶ 1:36:49Dr. Smith: I frankly will have to take for the record to figure out why we don't increment the cost of the drug part, but of course when you are mailing it there is a cost associated with mailing that we have to work through. The other thing as I've said multiple times and hopefully recognize, we have to go with taa compliant sources. We do.
▶ 1:37:16Sen. Warren: May be a wasn't clear in my question, Dr. smith. It's my fault. I'm just trying to ask do you think maybe it is time to revisit whether or not the entity that manages prescription drugs does not also own a competing prescription drug dispensary that competes with every independent pharmacy in america and creates incentives to prefer your own subsidiary
▶ 1:37:50Sen. Warren: Over all of the independent pharmacies out there? Do you think it is time may be for dod to rethink that? You are getting ready to renegotiate a contract here.
▶ 1:38:01Dr. Smith: We are always willing to look at how we can do this better and certainly we can look at it, but most of what quite frankly is how we have set it up and what we have told them to do and perform it as. So I think it is reasonable for us to look at, we clearly will.
▶ 1:38:24Dr. Smith: Because of the way our contract is set up, I don't get the issue that clearly we need to have more discussion on relative to conflict of interest.
▶ 1:38:43Dr. Smith: All of our rule sets say you need to go to retail for brand and specialty because it is dramatically cheaper via the reit -- then it is via the retail network. We make 92% of those.
▶ 1:39:12Dr. Smith: We buy the drugs happy to see whether there's a better way to set it up.
▶ 1:39:22Sen. Warren: Dr. smith, it may be cheaper to do some things by mail.
▶ 1:39:28Dr. Smith: Dramatically.
▶ 1:39:36Sen. Warren: But I do not know why it is that the company that is administering how we are going to get prescription drugs out to our people and how they are reimbursed for it needs to own the mail order pharmacy and be in direct competition with every individual pharmacist out there and have an incentive to drive all of our prescriptions in a way that will maximize profits for this company if we are not in alignment on that simple -- central question, I don't know how to go forward, but thank you for having this hearing, we need independent
▶ 1:40:07Sen. Warren: Audits and we need to rethink these dod contracts.
▶ 1:40:08Chair Tuberville: Any other questions? You sure? You look like you've got something on your mind over there. [laughter]
▶ 1:40:16Senator King: What if these guys didn't have the mail-order pharmacy but they own cvs? Would it make sense to have them administering these programs for all these other pharmacies around the country but also in cvs?
▶ 1:40:38Senator King: The conflict is obvious and it seems to me were basically saying we've got this company, we've hired them to help us distribute drugs, but they also have their own distribution. To me the conflict is obvious. We have beaten the source pretty hard but I don't understand, I'm coming to this as an office, but the model makes no sense.
▶ 1:41:07Senator King: What if they own cvs, without be ok? They own cvs and deal with these independent contractors.
▶ 1:41:13Dr. Smith: At the end of the day frankly what we are most interested in is making sure our beneficiaries have great access and that we are saving the taxpayer money.
▶ 1:41:25Sen. King: I applaud you for that and that is what the mission is.
▶ 1:41:29Dr. Smith: I would hope so sir.
▶ 1:41:31Sen. King: Does the structure of this contract serve those purposes? That is the question.
▶ 1:41:36Dr. Smith: I think there is a need to prove that it doesn't.
▶ 1:41:38Sen. King: Thank you, Mr. chairman.
▶ 1:41:44Chair Tuberville: I will give everybody about a minute of closing arguments.
▶ 1:41:45Mr. Reybold: Yes, thank you, Mr. chairman. A lot to go over here. I would echo the points of senator king and senator warren with regard to vertical integration. It is funny how it always works out to cost beneficiaries more, harms retail pharmacies, but the way esi mail-order pharmacy comes out looking pretty good.
▶ 1:42:06Mr. Reybold: The other thing really quickly to record set is federal code absolutely provides that the federal government gets the same discounts whether they are filled up mail-order or filled at retail. That is important to preserve the record. Mail-order is not getting better discounts than retail pharmacies. That gets lost here. Lastly, the price is the same, I would push back on that.
▶ 1:42:35Mr. Reybold: The last thing I will say is yes the department of defense contract bars, literally bars fees, rebates, discounts specific to processing tricare prescriptions. That is what the contract said in a court filing filed by the ohio attorney general filed for into competitive practices by express scripts.
▶ 1:42:55Mr. Reybold: But express scripts negotiates aggregate discounts from drug manufacturers, pharmacies, administrative fees, they are engaging in aggregate pricing that allows them to continue to capture revenue from what is one of their biggest clients and that is the federal government and this tricare program. They are finding ways to leverage that and recoup money.
▶ 1:43:23Mr. Reybold: I bet you if there is an oig audit, they will actually find that money there and if I was the federal government, if I were dha, if I were anyone of express scripts' commercial clients, I would be running to an auditor based on what we have seen here today and the contract lingwood you provided. Thank you.
▶ 1:43:41Chair Tuberville: Dr. lansford?
▶ 1:43:44Dr. Lansford: Thank you again for the opportunity to testify. There are a lot of layers to this and something that is just apparent to me with my colleagues is that we have a strong desire to serve these people. We want to be there for them, we used to be able to be there for them, and we want to be there for them again. All we expect is reasonable reimbursement in that process.
▶ 1:44:13Dr. Lansford: Whenever I hear the admiral say there is an expense to mailing, I would say there is an expense to the other components of delivering the drug within my pharmacy as well as do not get accounted for in terms that are sent to me. So we just want a fair shake at it, that's all we want. We just want a fair deal to provide service to these members.
▶ 1:44:32Chair Tuberville: Thank you. Dr. kautzner?
▶ 1:44:37Dr. Kautzner: Thank you for the opportunity to be able to testify. I would first point to again our organization is proud to serve the men and women of the military, military families, and retirees. We get up everyday to ensure we can do that one of the 200 million plus prescriptions we service every single year. We have been doing this for over 20 years and hope to do it for many years to come. It is a passion of our organizations.
▶ 1:45:05Dr. Kautzner: If we look at the facts, 98% to beneficiaries have a pharmacy within 15 minutes of their home exceeding dha standards. We focus on service. 90 percent plus beneficiary satisfaction is high with the tricare benefit and the services we provide.
▶ 1:45:24Dr. Kautzner: We look at the savings, we are providing to date given this contract over $140 million of savings that have gone back to the government for other real defense components that they can re-utilize those dollars for. This agreement is 100% pass through, we do not retain that $14 that is collected at the mail-order pharmacy, that goes back to dha. Those components again are misunderstood.
▶ 1:45:54Dr. Kautzner: I appreciate the time today though. On behalf of the over 1000 veterans that work for our company, proud of the opportunity today to be able to testify and proud of what we do each and every day getting up to ensure we take care of our servicemen and women.
▶ 1:46:10Chair Tuberville: Dr. smith? Or admiral. General. [laughter]
▶ 1:46:15Dr. Smith: Admiral, sir. Chairman tuberville and ranking member warren along with senator king, appreciate the opportunity to testify today. I do think that this is a high quality, very good contract that we actually are saving significant amounts of money for the taxpayer, but most importantly doing a remarkably
▶ 1:46:48Dr. Smith: Good job in a complicated system taking care of our beneficiaries and making sure that they get the access and the support for whatever their pharmaceutical needs are. We appreciate the questions and once again thank you for the opportunity.
▶ 1:47:09Chair Tuberville: Thank you. A very complex issue. One day I think a football coach might be able to understand all of it. I don't know whether I can or not but it is pretty complex. It kind of reminds me of one of my favorite movies, "cool hand luke," what we have here is a failure to communicate in a lot of areas.
▶ 1:47:30Chair Tuberville: And a lot of that is a lot in politics and the federal government, but thanks to all of you for being here and hopefully we got something out of this and maybe we can do it again and continue to try to work out all the kinks, but we appreciate you all being here. Thank you very much. [gavel] 2 [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]