Senate hearing scrutinizes conflict-of-interest claims at heart of TRICARE pharmacy contract

Express Scripts declined to voluntarily agree to an independent audit of its TRICARE pharmacy contract Wednesday, as a Senate Armed Services subcommittee hearing focused on contract language that critics said could allow the company to adjust pharmacy reimbursements after claims are processed. The contract covers pharmacy benefits for 9.5 million service members, retirees, and military families.

Sen. Elizabeth Warren said, "Express Scripts both decides the reimbursement rates for its competitors and it provides its own pharmacy benefit services. All of it gets billed to TRICARE." Warren cited Defense Department fiscal year 2023 data showing the company's mail-order pharmacy cost 12.5% more than retail for 30-day generic prescriptions. The contract is worth at least $4.3 billion over seven years.

Adam Kautzner, president of Express Scripts, said he had not reviewed the clause Warren cited. "Our company will comply with what Congress and DHA are saying that we need to do," he said.

Defense Health Agency witness Dr. David Smith defended the program's structure, saying the Defense Department uses a pharmacy benefit administrator model in which the contractor receives a fixed administrative fee per prescription and cannot generate revenue from drug prices. He said the government controls formulary decisions and drug pricing directly, and that the retail network currently includes more than 46,000 pharmacies, exceeding the contractual minimum by 11,000.

Independent pharmacy witnesses described a different experience. Dr. Micah Lansford, owner of a community pharmacy near Cannon Air Force Base in New Mexico, said Express Scripts' reimbursement rates after the most recent contract award would have left him losing money on every prescription filled, forcing his pharmacy out of the TRICARE network in 2023. Greg Reibold of the American Pharmacy Cooperative, representing approximately 1,500 independent pharmacies, said roughly 13,000 retail pharmacies were removed from the network between 2022 and 2023, affecting an estimated 400,000 military families.

The fiscal year 2027 National Defense Authorization Act includes an audit requirement but must still be enacted.