Military cutting costs via Rx negotiations; NACDS hails finding as pharmacy victory

NEW YORK It was one of those clear “ah-ha!” moments that don’t come around nearly often enough.


In recent days, the Pentagon affirmed what the retail pharmacy industry has been saying all along: that leveling the playing field between community pharmacies and big, impersonal mail-order prescription outlets does more than just expand freedom of choice for military health plan beneficiaries, and eliminate a competitive disadvantage for drug retailers. It also saves the taxpayers money.


The proof of that assertion came with the Defense Department’s revelation that its TRICARE health benefit program for military members and their dependents is spending significantly less on prescription medicines than called for by original spending projections for fiscal year 2010. How much less? Roughly $1.67 billion, according to Defense Department projections.

TRICARE is squeezing those savings out of its expanded power to negotiate prices directly with drug manufacturers. Before its procurement rules were changed earlier this year, the military health program could only negotiate lower prices for drugs purchased for mail-order and military-base pharmacies. The result was higher prices for drugs dispensed to TRICARE beneficiaries who opted to have their prescriptions filled at a local drug store, supermarket or mass merchant pharmacy.

For years, retail pharmacy leaders have cried foul, arguing that the higher out-of-pocket costs put their stores at an unfair competitive advantage by steering the nation’s more than 9 million TRICARE beneficiaries to mail order and PX pharmacies. The industry won a huge victory when the Pentagon agreed that the old procurement system reduced freedom of choice for those patients.

The program’s expanded negotiating power will yield will result in “remarkable savings” for Defense, asserted NACDS president and CEO Steven Anderson.

The projected savings for TRICARE’s drug procurement program could also be enough to lend new ammunition to arguments by liberal lawmakers in the House and Senate who want to toughen the drug-price negotiating provisions in Pres. Obama’s health reform plan. As things now stand, the president is reassuring the pharmaceutical industry lobby that the White House will stand behind its earlier agreement to extract a maximum of $80 billion in negotiated savings from drug makers over the next decade for federal health programs.

Many Democratic lawmakers want far more, and they argue that direct and ongoing price negotiations with drug makers could save taxpayers additional billions. Are they looking at the savings wrung out of TRICARE’s expanded negotiating power? It’s a safe bet they are.

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