ACI’s 11 th Annual “Big Four” Pharmaceutical Pricing Boot Camp May 24, 2017 TRICARE: A Study of the DoD’s Managed Health Care Benefits Program James W. Kim McDermott Will & Emery JaKim@mwe.com The information contained in this presentation is for educational purposes only and does not constitute legal advice. Tweeting about this conference? # ACIBigFour
Military Health System: An Overview # ACIBigFour
Defense Health Secretary of Defense Agency USD(P&R) CJCS ASD(HA) POLICY DEVELOPMENT & OVERSIGHT Combat Support Agency Responsibilities POLICY EXECUTION Defense Health Agency Director Defense Health Agency Director DHA OGC Deputy Director Sr. Enlisted Advisor Deputy Director Sr. Enlisted IPO PEO DHMS Advisor EHR Functional Chief of Staff Champion Special Staff HA / DHA Component Communications Innovation Admin & Mgt EEOO Manpower Comptroller Liaison Acquisition Executive Strategic Mgt Def Health Board DoD/ VA PCO Procurement Prog Integration Analytics Small Business Education & Training Healthcare Operations Research Development & Health IT Business Support NCR Medical Directorate * Directorate (CMO) Acquisition Directorate Directorate (CIO) Directorate Directorate Innovation and Advanced Walter Reed National METC HQ TRICARE Health Plan Facility Planning Advanced Development Technology Dev (CTO) Military Med Center Portfolio Mgmt and Ft. Belvoir DMRTI Pharmacy Medical Logistics Science & Technology Customer Relations Community Hospital Budget & Resource Clinical Infrastructure Clinical Support Infrastructure & Operations Joint Pathology Center JMESI Management Program Public Health * Academic Review Veterans Affairs R&D Solution Delivery Program Integrity Liaison & Oversight Prof Development , Readiness Information Delivery Sustainment, & Prog Mgmt 3 Warrior Care Program Cyber Security Defense Health Service System (DHSS) Defense Health Clinical # ACIBigFour Systems (DHCS)
Defense Health Agency: Organizational Chart # ACIBigFour
Functional Alignment – DHA Pharmacy Operations Division Pharmacy Aurora, Falls Church, Operations Div. San Antonio Locations Informatics Integrated Chief of Staff/ Purchased Formulary Integration Utilization Operations Operations Management Branch Branch Branch Branch Branch Data Engine Automation Project Lead P&T Operations TPharm Contract Execution Administrative Ops Utilization Analysis Clinical Capability Support Outcome Assessment Section Contract Requirement Integration Budget / Travel Data Integrity MTF to MOP Capability/Role out Evidence Based / Practice Compliance Measures Task Management Clinical Initiative Lead ePrescribing Capability / Role out Guidelines TPharm4 Transition Lead HR Medication Adherence PDTS Transition Drug Contracting Integration Staff Development / Trng Replenishment Management MTM / PCMH / Multiple Medications Point of Service Integration Support MCSC MTF Support Liaison Industry Liaison ‘MART’ Support Support Telemedicine planning Interoperability 1-1-1 Program Lead BAP Support Audit Initiatives Contract support Support Provider Education Com Development/Tracking Congressional Dashboards P&T formulary decision and (703) Retail Refund BPR Metric Support 703 communication Drug Contract Execution Division Mission Alignment / P&T purchased care liaison DLA Liaison/VA Liaison CCONOPS (Shared Services) Performance Support Liaison Joint National Contracts Lead for Provider Education / Reports New Drug Initiative DAPA / BPA Lead for eMSM initiatives / Prime Vendor Liaison Market Collaboration / eMSMs Replenishment Liaison MTF Support – Ops / Execution Centralized Refill Initiative Lead for MCSC Collaboration P&T Support # ACIBigFour
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What Is TRICARE? • TRICARE is the DoD health care program serving 9.5 million Active Duty Service members (ADSMs), National Guard and Reserve members, retirees, their families, survivors, and certain former spouses worldwide. • As a major component of the Military Health System (MHS), TRICARE brings together the worldwide health care resources of the Uniformed Services supplemented by civilian health care professionals, institutions, pharmacies, and suppliers # ACIBigFour
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TRICARE Beneficiaries # ACIBigFour
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TRICARE Regions Reduced from Three to Two • Contract regions changing from the current configuration of North, South, and West to just East (combining the prior North and South regions) and West, with the two regions managed under different companies. • The new regional contracts were awarded on July 21, 2016. • East = Humana Government Business • West = Health Net Federal Services • After reviewing the filed protests, the GAO upheld the contract awards on November 11, 2016. • Contract initiation 1/1/2018 # ACIBigFour
DHA Pharmacy Division • Advise DoD Health Affairs (HA) on policy development and priorities setting related to Pharmacy operations • Create and implement a unified set of business rules to guide and execute DoD policies for Pharmacy, with consideration for: • Beneficiary Satisfaction • Cost-effectiveness • Evidence-based best practices • Retail recapture • Data-driven performance measures • Align incentives across the enterprise to drive behaviors • Provide clinical pharmacists credentialed to participate in direct medical care (i.e., Patient Centered Medical Home (PCMH)) # ACIBigFour
TRICARE Pharmacy • Prescription benefit authorized under 10 USC 1074g • Prescriptions available through: • MTFs • Mail order • Retail Pharmacies • Copayments: • Home Delivery (Up to a 90 day supply) • Generic: $0 • Formulary: $20 • Non-Formulary: $49 • Retail Pharmacy (30 day supply) • Generic: $10 • Formulary (Brand) $24 • Non-Formulary: $50 # ACIBigFour
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Reimbursement for Drugs • All Rx subject to Federal Ceiling Price limitations (32 CFR 199.21(q)) & refunds required when FCP exceeded • DoD Retail Pricing Agreement required for inclusion on Uniform Formulary and availability without preauthorization • Preauthorization requirement at retail network pharmacies (does not apply to other points of service). # ACIBigFour
DMEPOS Reimbursement • TRICARE uses the reimbursement rates established by the Centers for Medicare and Medicaid Services (CMS) for certain items of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies. • CMS DMEPOS Fee Schedule - reimbursement rates for those items that begin with a HCPCS code of A (transportation supplies, medical & surgical supplies, administrative/misc/experimental), E (DME), K (DMERCS), L (Orthotic/Prosthetic), or V (Vision/Hearing Services). • For all other items of DMEPOS, TRICARE pays a maximum allowable charge. # ACIBigFour
DHA Pharmacy Costs # ACIBigFour
MHS Rx Costs # ACIBigFour
Rx Cost Comparison Across Distribution Channels # ACIBigFour
Managing Utilization/Cost • Retail Refund Program • $7.0 B in total refunds (FY09-OCT13) • $1.4 B average annually since 2009 • Formulary management plays a key role in negotiating with manufacturers • $1.3 B cost avoidance in FY12 • Formulary Management Tools • Medical necessity, prior authorizations, quantity limits, step therapy • Maximize use of Home Delivery • Cost Share/Co-Pay considerations # ACIBigFour
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Updates – NDAA 2017 • Section 701 – establishes TRICARE Select (PPO plan) – replaces TRICARE Extra and Standard • Prior authorization requirement for specialists prohibited • Section 705 – Value-based incentive program to be incorporated into TRICARE health services contracts (including “per capita cost”) – to be implemented 1/1/2018 • Section 706 – Privatization – use of private-sector healthcare systems • Section 717 – Veterans to receive care at MTFs • Section 743 – Rebate program pilot - manufacturers to pay rebates based on “lowest rate available,” including rates charged to the mail order pharmacy. The pilot program would begin no later than October 1, 2017 and end by September 30, 2018. # ACIBigFour
Requiring Mail Order/MTF Use • Under an interim rule published by DoD in August 2015, following the change mandated in the FY 2015 NDAA, TRICARE began requiring beneficiaries to use the mail order system or a military pharmacy to refill select non-generic prescription maintenance medications. • In September 2015, Express Scripts notified beneficiaries taking an affected drug that beginning October 1, they would no longer be able to fill maintenance drug prescriptions at retail pharmacies unless they wished to pay the full cost, and explaining their options. • After October 1, beneficiaries still filling an affected drug at a retail pharmacy received additional notification of the change and one final “courtesy” fill before having to pay 100 percent of the cost of their medication. • DoD estimates this program could save the government at least $88 million a year, but will help beneficiaries as well, with an estimated beneficiary savings of $176 per year. # ACIBigFour
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