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Pharmacoeconomic Center Conference January 8, 2007

Pharmacoeconomic Center Conference January 8, 2007. RADM Tom McGinnis, U.S.P.H.S. Chief, DoD Pharmaceutical Operations Directorate. V5. Scope of DoD Pharmacy Benefit. 9.2M Beneficiaries 6.7M users of pharmacy benefit 115M prescriptions dispensed in FY06

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Pharmacoeconomic Center Conference January 8, 2007

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  1. Pharmacoeconomic CenterConferenceJanuary 8, 2007 RADM Tom McGinnis, U.S.P.H.S. Chief, DoD Pharmaceutical Operations Directorate V5

  2. Scope of DoD Pharmacy Benefit • 9.2M Beneficiaries • 6.7M users of pharmacy benefit • 115M prescriptions dispensed in FY06 • 536 dispensing pharmacies across 3 military services in 121 MTFs • 1 Nation-wide TRICARE Mail Order Pharmacy (TMOP) • 58,650 retail pharmacies (TRRx) managed by one PBM • Nation-wide Uniform Formulary

  3. Key Points of Uniform Formulary • All drugs on UF unless TMA Director approves DoD P&T recommendation of non-formulary (3rd Tier) Status • Preserves access: • Beneficiary access to all covered drugs • Encourages use of more cost-effective POS (Co-pays and Amount Dispensed) • Influences beneficiary and provider choice • Preserves competitive market for best prices to gain market share • Allows beneficiaries to obtain non-formulary drugs that are “clinically necessary” at the 2nd Tier co-pay

  4. Military Treatment Facility Pharmacy • 536 Dispensing Pharmacies in 121 MTFs • Beneficiaries have access to prescriptions without co-pay • Formulary composed of Basic Core Formulary plus MTF specific additions • Least costly option to patient – no co-pays • Least costly point of service for DoD • 44% Rx workload performed at MTF • 25% of dollars spent* *Does not include inpatient costs

  5. TRICARE Mail Order Pharmacy • TMOP Contract awarded to Express Scripts, Inc. (Sep 02) • Services began 1 Mar 03 – contract expires 2007 • Services via state-of-the-art facility in Tempe, AZ • Product replenishment through Prime Vendor (McKesson) at Federal Pricing • Largest commercial mail order account within industry • 7% of Rx workload performed at TMOP • 12% of dollars spent

  6. TRICARE Retail Pharmacy • Consolidated retail pharmacy services under a single contract to optimize benefit management • Consistent benefit across all regions • Portability in 50 states, Guam, Puerto Rico, USVI, American Samoa, Northern Mariana Islands • Pharmacy Help Desk Services 24 x 7 x 365 • TRRx Dedicated Staff • 58,650 Retail Pharmacies Now Participate • 49% Rx workload performed at TRRx • 63% of total dollars spent

  7. Unique Users - Point of Service- All Ages Unique Users FY05 = 6.6M FY06 = 6.7M Mail Order MTF 1% 1% 4% 5% 2% 46% Retail 28% 19% 42% FY06 30% FY06 Source: PDTS

  8. 51% 13% 18% 25% 36% 24% 38% 27% Unique Users - Point of Service Unique Users < 65 = 5.2M Unique Users ≥ 65 = 1.5M Mail Order MTF 1% 2% Mail Order 15% 16% 1% 5% 54% <1% <1% <1% <1% 15% MTF 2% 2% 1% 1% 17% 25% Retail Retail Source: PDTS

  9. Point of Service FY02 FY03 FY04 FY05 FY06 MTF only 3,454,419 3,574,200 3,319,477 3,031,537 2,833,312 Retail only 1,033,576 1,264,787 1,500,504 1,820,899 1,992,616 Mail Order only 79,124 83,654 64,605 61,343 55,076 MTF & Retail only 814,048 927,717 1,104,689 1,253,612 1,297,796 MTF & Mail Order only 54,885 37,777 42,791 45,569 45,752 Retail & Mail Order only 181,881 206,748 256,927 288,287 331,587 MTF, Mail Order & Retail 96,130 101,119 101,110 112,572 121,180 Total Unique Users 5,714,063 6,187,185 6,390,103 6,612,378 6,685,709 Eligible Beneficiaries 8,671,727 8,929,071 9,154,440 9,210,547 9,177,548 % of Eligible Beneficiaries Using Pharmacy Benefit 66% 69% 70% 72% 73% Unique User Trends Source: PDTS

  10. Prevalence of Pharmacy Benefit Use Proportion of beneficiaries who fill one or more Rxs during a given period of time # Users Prevalence = = # Beneficiaries FY02 – FY06 Sources: PDTS

  11. 3.5 MTF 3.0 2.5 2.0 Millions of Users Retail 1.5 1.0 Mail Order 0.5 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY01 FY02 FY03 FY04 FY05 FY06 MHS PHARMACY BENEFIT USERS Source: PDTS

  12. DoD Pharmacy WorkloadRaw Number of Rx’s Filled

  13. DoD Pharmacy Market ShareBy Point of Service – 30 Day Equivalents Percent

  14. DoD Drug Expenditures thru FY 2006 Millions .

  15. DoD Pharmacy Yesterday

  16. Pharmacy Data Transaction Service (PDTS) • A centralized data repository that records information about prescriptions filled for beneficiaries through Military Treatment Facilities, the Retail Pharmacy network and the TRICARE Mail Order Pharmacy • Provides Drug-Drug interaction checking of the complete patient medication profile from all points of service (101 Legacy Data Centers, Mail Order, & Retail) • Monitoring utilization and costs to support policy and formulary decisions • Prevents same drug from being obtained from multiple sources • Utilizes industry standard messaging (NCPDP 5.1)

  17. DoD Pharmacy Points of Service Military Hospitals 101 Legacy Data Centers 700+ Dispensing Sites Mail Retail 58,650+ Locations AudioCARE Paper Electronic Paper PDTS Military Provider Civilian Network Provider

  18. ePharmacy Military Hospitals Mail Retail RxCOTS PDTS ePrescribing Civilian Network Provider Military Provider TOL

  19. Pharmacy Commercial Off the Shelf (RxCOTS) • Commercial Product • Acquired October 2005 • Will be integrated with Military Electronic Health Record • Enterprise order portability • Refills anywhere • Standard drug information across Enterprise • Policy implementation at an Enterprise and Local Level • Immediate tracking of inventory and dispensing

  20. T-Pharm Contract • RFP released 2006 • $50B value • What it does • Consolidates mail and retail under one contract • Decreases duplication of effort; simplifies contract administration • Optimizes distribution model • VA participating in a limited way

  21. Current Strategies • Contain the growth at the retail point of service • Adjust co-pays to encourage use of mail order pharmacy over retail pharmacies • Educate and market the benefits of mail order to our beneficiaries • Expand program to allow voluntary price reductions at retail by drug companies • Provide tools to MTF’s to monitor costs • Expand Utilization Management efforts and data mining • Promote generic drugs

  22. Utilization Management Program • Maximize use of: • Most cost effective agents • Most cost effective point of service • Maximize use of: • Generic vice brand • Formulary vice non-formulary • Retail network vice non-network pharmacies • MOP vice retail pharmacies

  23. Long Term Strategies • E-Pharmacy Initiatives • Contain the growth and costs at the retail point of service • Pay MTF pharmacies for the ingredient cost plus a co-pay • MTF Commanders should look at pharmacy as a revenue source rather than a cost center • Will result in more open MTF formularies – less need for patients to seek Rx in the retail network • Expand number of military pharmacies • On base and off base • Full service formularies

  24. MTF Pharmacies and Clinics– Today and Tomorrow?

  25. Defense Health Budget • 2001 --- $18 Billion • 2006 --- $38 Billion (8% of DoD budget today) • 2015 --- $64 Billion (estimate) (12% of DoD budget)

  26. Retirees Health Care Costs • 2006 --- 58% DoD Health Care Dollars • 2016 --- 66% DoD Health Care Dollars

  27. Projections to 2015 • At current growth projections (11%) and under current benefit structure by 2015: • MTFs - $4.68B • TRRx - $4.70B • TMOP - $0.38B • >age 65 using all points of service - $7.80B TOTAL $17.50B (6.18B in FY2006) Or 27.34% of the Defense Health Budget in 2015 Up from the 16.26% of DHP budget in 2006

  28. Cost Increases Driven By: • Benefit Expansions, including TRICARE for Life and TRICARE Reserve Select • No changes in TRICARE fees the past ten years • More beneficiaries attracted to low cost, expanded benefits, and quality of the program • High inflation in the health care industry • Employers provided incentives for beneficiaries to use TRICARE

  29. Questions?

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