Hearings to examine the TRICARE pharmacy program.

Hearing gives us an opportunity to examine a critical component of military health care, the TRICARE pharmacy program. Our witnesses today have a wide variety of experiences from Policy Oversight of the program, all the way to TRICARE beneficiaries using its services. I wanna thank Doctor David Smith, Doctor Adam Kautzer Kautzner. Is that it? That's pretty good. Uh, Doctor Langsford and Mister Greg uh, Rebo. As someone who's spent decades coaching young men and women to perform at highest level, I understand that success depends on preparation, discipline, and access to the right tools. The same principle applies to our military. We cannot expect service members to maintain peak readiness if they cannot reliably uh access the medications and treatments they need. The TriCare pharmacy program serves millions of active duty service members, retirees and military families. For many beneficiaries, access to prescription medicines or medications is not a matter of convenience, it is essential to managing chronic conditions, recovering from injuries, maintaining health mental health, and ensuring overall fitness for duty. As Congress contends to oversee continues to oversee military health care spending, we must strike the right balance between controlling cost 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 particularly interested in how the pharmacy program supports preventive care, injury recovery, behavioral health, and overall force readiness. We should be asking whether beneficiaries can access medications in a timely manner, whether military families and rural communities face unique challenges, and whether the department is using modern tools and data to improve outcomes while managing cost. Also wanna understand how the department is preparing the future challenges, including drug shortages, supply chain uh disruptions and the growing costs associated with specialty medica- medications. Ultimately, our goal should be to straightforward provide America's service members and their families with reliable access to high-quality pharmacy services, while being responsible stewards of taxpayer dollars. I thank our witness for appearing here today and look forward to their testimony. Um, we will have senators coming in and out because we have a lot of committee hearings today, so be patient with us. Uh, but we also have a lot of questions that we on- wanna ask. So, thank you for being here today and now, Senator Wan in her open opening statement.

Uh, thank you, Mister Chairman, and thank you to our witnesses for being with us today. We're here today because the TRICARE pharmacy program lacks meaningful oversight. Since twenty twenty two, thirteen thousand pharmacies have left the TRICARE network. That means that's thirteen thousand local pharmacies that can no longer fill prescriptions for our service members, and four hundred thousand military families have gotta get out there and find a new pharmacy. The consequences of losing access to your local pharmacy can be immeasurable. Think about veterans with complex medical needs who rely on the personalized care of a local pharmacist, someone who will check for drug interactions and 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 it is the kind of care they deserve. I have letters from fifty-eight pharmacists who speak directly to this issue. Mister Chairman, I request that they be entered into the record.

So done.

This subcommittee has a responsibility to understand why this kind of care is shrinking in TRICARE. So we need to look at the contractor who is running this program. Since two thousand three, DOD has awarded the TRICARE pharmacy contract to Express Scripps, the largest pharmacy benefit manager, or PBM, in the country. For twenty-three years, they have had an exclusive contract with the most recent contract worth at least four point three billion dollars in revenues over seven years. So, what does Express Scripps do with billions of taxpayer dollars? Well, they decide which retail pharmacies are in the TRICARE network and what they're gonna get paid for a prescription. They process pharmacy claims and they run a mail-order program through Express Scripps subsidiaries their own subsidiaries called Express Scripps Pharmacy, and Accredo, a specialty pharmacy. Here's the kicker. Express Scripps both decides the reimbursement rates for its competitors and it provides its own pharmacy benefit services all of it gets billed to TRICARE. And that seems to me to be a pretty clear conflict of interest. And yet DOD actually requires the TRICARE pharmacy contractor both to own a PBM and its own pharmacy. I don't know who talked them into that, but it is an open invitation for Express Scripps to milk the federal government, to kick out the competition, and to steer a lot of money its own way. The squeeze plate 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 PBMs charge insurers more than what they reimburse pharmacies for um uh for a drug or engage in steering in which they under-reimburse the competitors and send more business to the PBM's own pharmacy. DOD and Express Scripts are quick to clarify that TRICARE pharmacy contract is not a traditional PBM contract. So they claim that these profit maximizing games don't apply to them. The problem is the facts. Audits of Express Scripts and other government contracts show exactly these same practices. But DOD and Express Scripts want you to believe there is nothing to see here. Okay. But 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. And 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 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 and the Express Scripts subsidiaries. Nearly two months later, I am still waiting for those numbers. If DOD and Express Scripts refuse 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. Now, I am glad that this committee included a requirement in the fiscal year twenty twenty-seven in DAA. to audit this contract. We need to pass that requirement into law. DOD has also begun negotiating the next pharmacy contract, which will take place in twenty-thirty. I urge DOD to flatly prohibit vertical integration in the next TRICARE pharmacy contract. A 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. Thank you again for having this hearing, Mister Chairman.

Thank you, Senator Warren. Uh, before we start, the personnel subcommittee has received a number of statements for record. Without objection, they will be included in the record. Now, uh, we have four witnesses. Uh, Doctor Smith, we'll start with you, but I'd I'd like to say this. W We we have a lot of questions.

Yes.

Uh, I I've read some of your opening statements. They're rather long. Please keep your statements short. Now at the end, if you wanna continue with your statement, we'll let you do that. But I'd like to get to the questions because we have senators here that need to, need to get on to other other hearings. So Uh, Dr. Smith, we'll start with you, please.

Well, Chairman Tuberville, 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 is proud 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, the military treatment facility, the TriCare mail-order pharmacy, TMOP, which provides home delivery, and the TriCare retail pharmacy network. My written statement provides much more detail, as you pointed out, sir, um, uh, of the TriCare 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. Over seventy percent of all prescription medications are provided through either the mail-order or the retail networks, which are managed by the Defense Health Agency through our TriCare pharmacy contractor, Evernorth Federal Services. This contract is different from most civilian models for administering prescription drug benefits. DHA uses a pharmacy benefit administrator or a 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 the PBA model is that the DHA pays the contractor a fixed administrative fee per prescription, filled at retail or team-up. The Tfarm five contractor cannot generate revenue from price of drugs themselves at either retail or mail-order outlet. The civilian PBM model 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. We are essentially the PBM for the and saving um dollars for the taxpayer. Through this model, the government ensures contractor incentives are aligned DHA pharmacy program goals rather than revenue generated from drug pricing. The DHA does recover costs on drug prices directly from the pharmacy manufacturers, not the pharmacy contractor, thanks to the statutory authority that Congress has provided us through the TRICARE retail refund program for drugs dispensed at retail. Recovered refunds are returned to the government, and are independent of the T farm five contract. Since the program was first introduced, the department has recognized over twenty-two billion dollars worth of savings, and in fiscal year twenty-six those savings are projected to ra- uh to uh reach two billion dollars. The DHA establishes uh access to pharmacy service requirements as part of the contract. The contractor must offer at least one network pharmacy within a fifteen minute drive for ninety-five percent of all the beneficiaries, and maintains a minimum network size of thirty-five thousand pharmacies. Currently there are over ninety-eight percent of our beneficiaries who are within a fifteen minute drive time, and over ninety-nine percent that are within a thirty minute drive time. The retail network consists of forty-six thousand pharmacies, eleven thousand higher than the contractual floor. The government has full visibility and control over the cost 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. Evernorth receives no reimbursement for the cost of drugs, themselves dispensed through and under team-up. The government determines the TRICARE pharmacy uniform formulary for the covered drug list through a physician-led Department of Defense, uh, Pharmacy and Therapeutics P and T Committee, and the Department of War P and T Committee develops and recommends drugs for formulary tiers, sets priority prior authorization criteria, and ensures the pharmacy benefit is standardized across all points of service, based on medical needs first and foremost. The government-managed model has saved the taxpayers over six point five billion dollars in FY twenty-five. through federal supply schedule pricing and statutory refunds. In conclusion, the DHA is proud of the comprehensive worldwide pharmacy benefit it offers to our nine point five million beneficiaries, and similar to the overall US health system, pharmaceutical cost growth remains an area of intense focus and concern. The department continues to explore approaches that ensure continued, timely access to hard-earned benefits, in a physically responsible manner. Thank you again for the opportunity to address our approach to the managing this important program, and I appreciate your vital support to the MHS and look forward to answering your questions.

Thank you, Dr. Caster.

Chairman Tuberville, Ranking Member Warren, and members of the subcommittee, thank you for the opportunity to p- to appear before you today. My name is Adam Kotzner. I serve as President of Express Scripps and Ever North Care Management. We are honored to serve more than nine million TriCare beneficiaries on behalf of the Defense Health Agency. Service members, retirees, and military families depend on the TriCare pharmacy program, wherever they live and wherever they serve. Ensuring they have reliable access to the medications they need is a responsibility we take seriously every day. 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. Today, the TRICARE 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 forced readiness. Congress established the program to provide consistent coverage to TRICARE beneficiaries. Congress sets the structure of the benefit and determines beneficiary cost sharing. 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. We build 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. TRICARE beneficiaries currently have access to more than forty-six thousand network pharmacies nationwide. This exceeds Defense Health Agency requirements by more than eleven thousand pharmacies. More than ninety-eight percent of beneficiaries live within fifteen minutes of a network pharmacy and more than sixteen thousand independent pharmacies nationwide participate in the network. We continue to welcome any independent pharmacy who wishes to join the TRICARE network. Through the TRICARE mail-order pharmacy, we help insure 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 TRICARE beneficiaries while controlling costs. This preserves resources for other mission-critical priorities. According to GAO, this is one of only two major TRICARE contracts that has decreased in cost over time. We operate within the framework the government has established and we are committed to continuous improvement as the needs of the military evolve. 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. You you get bonus points for cutting it down pretty good. Thank you. Doctor Lansford.

Chairman Tuberville, Ranking Member Warren, and members of the subcommittee. Thank you for the opportunity to testify before you today. My name is Doctor Michael Lansford. I'm a pharmacist and owner of Roden Smith Pharmacy in Clovis, New Mexico, uh, and sits next to Cannon Air Force Base. It's a community of active duty, uh, members, their dependents, and retirees, and we've been able to serve this community for as long as I can remember. Remember, we did anyways up until twenty twenty three, when Express Scripts forced us out of the TRICARE program. For years, TRICARE 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, medsync, immunizations, delivery, compounding, and a pharmacist that knew their family and their situation. Now many pharmacies like mine have been forced out of the TRICARE 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 worked best for them. I reviewed all of the almost seven thousand prescriptions we filled And twenty twenty-two, our y- our last year in the program, and we are - we were reimbursed on average thirty-seven cents below the cost of the drug itself without any additional allowance for overhead. After ESI was awarded the Tfarm five contract, they drastically reduced their reimbursement rates, such that I would have lost almost nine dollars on every prescription I filled before overhead. or for any other expense. That would have been catastrophic for our business's viability and for all the other patients that we serve. Prescription care should not be a loss leader. No pharmacy can continue serving patients under a contract that requires it to lose money on the very care that it provides. ESI's contract had real life consequences and was felt acutely by the families who live and depend on our care locally. People like Lynn, a disabled retired airman, and Jelaine, his wife, and also his full-time caregiver. Before each monthly fill, I worked with Jelaine 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 their airman is deployed abroad. They used to be able to come through the pharmacy drive-through or pop in for an antibiotic for a child. 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, they used to be able to come in, dump their problems or confusion quite literally on the counter in front of me, in front of somebody they knew and trusted. I can't do that for them anymore. And it wasn't just the patients that suffered under this contract change. I had to look each of them in the eye and say, " I am sorry. I can no longer help you." Mail order may deliver medication. Community pharmacy is where care is delivered. These 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. ESI decides which pharmacies uh can participate, how much they will be paid, and then profits when the patient is redirected to one of their mail-order or specialty pharmacy facilities. Then ESI supplies most of the data to judge whether or not the network is adequate or if they are successful. No contractor should be allowed to referee a game while also competing in it. Military families experience the consequences while the contractor 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. The question is not what pharmacy or what military families can tolerate, it's what they deserve. Thank you.

Thank you. Mister Raybold.

Thank you, Chairman Tuberville, uh, Ranking Member Warren, and, uh, distinguished members of the committee. My name is Greg Reibold. My name is Greg Reibold, uh, and I'm with American Pharmacy Cooperative, consisting of approximately fifteen hundred independent pharmacies throughout this country. Um. Grateful for the opportunity to speak, more grateful that uh Doctor Lansford here had the opportunity to share his experience which matches the experience of thousands and thousands of independent pharmacies across the state I I would lead with this I would posit that what Express Scripts did in the TriCare retail network is the poster child for while P for while PBMs should not be allowed to own pharmacies. Mail-order pharmacies, or retail pharmacies. It speaks to the problems of vertical integration. Now here's the thing. The law is complicated. Uh, under current law, TRICARE, federal law, absolutely favors mail-order pharmacies. It's entrenched. It restricts retail pharmacies from filling certain brand-name maintenance medications. And it, in the statute, penalizes beneficiaries for choosing retail via higher cost sharing on paper. And every chance Express Scripps gets Every chance they get, they love to tout the savings of mail-order pharmacy. But here's the thing. Under DHA's own data, it turns out that despite the federal code, over and over and over again, it's cheaper for a TRICARE family, for a TRICARE beneficiary to fill a prescription at a retail pharmacy, than it actually is at ESI's mail-order pharmacy. It's cheaper on those cost shares, stunningly filling a generic medication at a retail pharmacy in TRICARE, not only is cheaper for the beneficiaries, via lower cost sharing, it's cheaper for the agency itself. According to their own reports, year over year over year, generic medications on average are cheaper at retail pharmacies than at Express Scripps mail-order pharmacy. In twenty eighteen they were cheaper by eighty-five percent on average for a thirty-day generic medication. And so what happens? prescripts in around twenty twenty two, wanna cull between thirteen and fifteen thousand retail pharmacies from their network under the auspices of cost saving, I would posit, and if you're anything like me, and I know I am, I would posit that that you look at their self-interest. You look at the vertical integration. And DHA's own data shows that between twenty eighteen and twenty twenty two, ESI's mail-order pharmacy and the TRICARE network lost about nine percent of utilization. Nine percent utilization. Beneficiaries were choosing retail pharmacies to get the care that they deserve. And so what does Express Scripps, the PBM, do? They cull around thirteen thousand retail pharmacies from their network. Right? I think the GAO figure was, was around potentially three hundred and eighty beneficiaries that lost access to their pharmacy of choice. But you know who wins? Express Scripps Mail Order Pharmacy, the pharmacy owned by Express Scripps. That's the only winner here. The only winner here, and I wanna talk a little bit more about the Retail Pharmacy Network and I'll be quick, but Express Scripps loves to say, Doctor Acosta said, right, this program is different, there's nothing to see here, we operate differently. First of all, in federal pleadings, Express Scripps doesn't call themselves a PBA for TRICARE, they call themselves a PBM. Additionally, in court filings Express Scripps has said that they manage the TRICARE Retail Pharmacy Network in a manner that's indivisible, and indistinguishable from their other networks, including the Federal Employee Health Plan. That's Express Scripts' words. In court filings, there's no difference with how they manage that program. That's stunning and it's damning. And the reason it's stunning and it's damning is because the Office of Inspector General for the Office of Personnel Management has looked at Express Scripts' practices in their retail network for two Federal Employee Health plans. You know what they found? They found the books didn't match. They found that the drug prices they were reporting to the federal employee health plan clients didn't match the lower reimbursements they were negotiating with retail pharmacies, to the tune of eighteen million dollars. That tells you two things. One, they got two sets of books, and two, spread pricing is alive and well in the Express GRIPS retail TRICARE pharmacy network. I think the good news is there's things that we can do. Absolutely immediately I think DHA should engage in an audit using their Office of Inspector General with an inter-agency agreement with the Office of Personnel Management's Office of Inspector General. They've looked under the hood and they know where those bodies are buried. On top of that, I think certainly the contract can be improved to prohibit vertical integration, and to close these loopholes. And lastly, legislation is absolutely in order to remove the entrenched favoritism towards mail-order pharmacy, increased patient choice, end PBM steering, and take away the ability of Express Scripts to manipulate drug prices by moving to a market-based index. Thank you, Chairman.

Thank you very much. So obviously we have some disagreements in here. Let's get those out and and see if we can make it better. I'm, for six years I'm on the Health Committee and I've heard a lot about this, uh, over the years. So, uh, this'll be good. And, uh, I'm gonna yield my time to probably a guy who knows more about health care. Anybody up here is a being a senator guy. and the healthcare business for a long time, Senator Scott.

Thank you, Chairman. So, um, my background is I had two hundred and eighty-five thousand employees and I used PBM. I also owned at one time when I was running a hospital company, uh, the third biggest PBM. And then I was, um, the, the, I think the largest shareholder in a pharmacy chain that went through all the struggles of trying to make money, uh, where move things were moved into mail order, not just, not just drugs, but everything was moving to metal ordering so you, you know, you're losing more, so everybody up here, I've, I've sort of been in, in your position, so Doctor Smith, before I get, before I get to the PBM part, can I just ask you a um pretty simple question? How many uh fighter jets do we, does America buy from China? You know of any? You ever heard of any warships?

Not aware of any, but I mean, yeah.

And we w- it seems like a pretty stupid idea to buy, buy from them, wouldn't it, because they're they're we're building military because they're our adversary right

yes sir

so but the same time we buy drugs for them everyday and it's my understanding that that you know that we part of the reason we don't buy uh fighter jets or warships is from china is because one the um we don't wanna be relying on them and uh we probably could save some money right probably we might do it cheaper so why are we continuing to buy chinese drugs uh when we don't wanna rely on them for fighter jets or anything else

so sir i'm um we are well aware of some of the dependencies that are in the system that um we've had this discussion with a number of you the national security uh concerns that we have um and i believe we try to only buy t a a compliant um drugs which is part of the reason for the difference in the generic pricing um depending on where you are for the venue Uh, but we are doing a number of different efforts to try to shore up that chain. Um, and in um, next year, um, in that president's budget you will see um, funding that is dedicated to trying to do a number of efforts relative to um, shoring up that supply chain.

So, n- Dr. Smith, your part of your job is you wanna make sure that every um, buddy that's relying on TRICARE can get the drugs they need,

That's right.

right? and you wanna get the best price you can because it's tax payer money right

absolutely

that's you're trying to do both of those so under the under the uh contract with express grips or evernorth whatever it is so so how are they paid are they uh do they get do they have a profit uh incentive or do they have uh were they making money off the drugs or do they get a set fee and you set the price of the drugs

so the the basic way it works with um Uh, it it's complicated cuz there's there's three different pieces to this, but um relative to the mail-order pharmacy, they get a basically a fill fee from us.

Good.

All of the drugs are bought by the Defense Logistics Agency using the federal pricing and um our negotiations directly with the manufacturers and so we rep- we replace in kind anything that's used by their mail-order pharmacy and then they get an administrative On the retail side, we rely on the network that they built both for the commercial business and also for our business. Um and they have provided in the contract a network um uh discount guarantee for us. If they do better than that, there's incentives for them, if they do less than that, then they um basically have to make up the difference. Then we are the ones that go out and get the refunds based on the TriCare um uh the exact name is the TriCare Retail Refund Program that you all authorized us and we have that, so that brings it back down to about federal supply. And then our our pharmacy and therapeutics committee also then works with manufacturers on volume discounts and all, and we will go after additional discounts to save money. But none of that, and this is a distinct difference with all of the other plans including the FEHPP plans that were referred to um it does not go through evernorth it comes directly and from us back and forth with

So you're you're

and and evernorth actually one more thing sir i'm sorry to interrupt um on the team on the um retail network they are using direct government funds to actually pay the bills to the pharmacies

ok Do you set, so you set the, you decide the price, you're buying the drugs,

Yes, sir.

so it's your drug. And your, and do you set the co-pay, what is for, for Tri-Care?

Um, that's set by you, the, the Congress.

Right, so then, so um, so the um, uh, Express, Express Scripts is not set in the co-pay.

No, sir, they do not. Now, the, the pricing within the network that is paid to the pharmacy is part of, um, Evernor's work. we then come back and get um uh refunds from the pharmaceutical companies if that for the price that is above the FS uh just to be clear on that.

Right and you use you use whether it's Express Expressups or somebody else's use mail order because it's cheaper, right?

Um we use uh the advantage of mail order is multifold one is is that it's uh convenient for the uh person that needs to get their uh their drug on a recurrent basis Uh, but we also buy all the drugs for mail-order. So that makes it significantly cheaper than what is, um, what it costs in the retail network.

OK. So is the consumer mandated to use the mail-order?

If they're, um, for brand name drugs, they are after two fills in the, uh, retail network, we ask them to move over to the, uh, to the Tmop.

And that's a decision you made because you can save money.

Yes, sir.

OK. Alright. And so, um, Doctor Kossner, how m- how many pharmacies are there in the country?

Uh, Senator, there are over sixty thousand retail pharmacies in the country.

And so how many and how many do you contract with on behalf of the Department of Work?

Uh, so we contract today over forty-six thousand, so eleven thousand more than the minimum that's met in the contract.

So when there's somebody like Dr. Dr. Lanceford that l- he loses the contract, what's the right, what's the typical thing, why do, why does that happen, why do, why does the Express Scripts or Evernorth whatever change?

So we have uh sixteen thou- sixteen thousand plus independent pharmacies that that do participate and have chosen to to serve as TRICARE beneficiaries in in our network today uh we we do go out and and and contract, we wanna have as many pharmacies in our network as we possibly can, we would like to have uh even broader network than what we already have. But we do cover over ninety-eight percent of beneficiaries within a fifteen minute drive time today and which exceeds the the the standard within the contract. Um it depends on where those pharmacies are located, certainly those that are in very rural areas. Uh we we may contract with them even even differently because there's an unmet need and a gap that we need to fill. So it really depends on the location of that pharmacy and how many other pharmacies are around it uh that a beneficiary will have access to.

Can I ask one more question? So

All right, one more.

so, Dr. Smith, so if you if you didn't work with Express Scripts on their mail order, you could you could you could contract with somebody else, right? You could contract with another um PBM com company, right? There's no reason you have to do it with their Express Scripts.

Um Relative to the mail order, yes sir. It's a competitively bid contract each time.

OK, thanks.

Thanks, sir Scott. Senator Gorman.

Thank you, Mister Chairman. So, we know that insurance companies often contract with the pharmacy benefit manager to manage the prescription drug coverage. And at least in theory, the way it was supposed to work is that the PBM would work for the insurance company and for the people who have insurance with them. But PBMs have gotten caught doing all kinds of self-dealing. We've already mentioned several times today, it was in in much of your testimony, spread pricing. And that's when the PBM reimburses an independent pharmacy, not its own subsidiary, but an independent pharmacy, seventy dollars for a drug, then bills the insurance company a hundred dollars for the drug, and then, often secretly, pockets the thirty dollar difference. That's spread pricing that we're talking about today. Now, DOD and Express Scripts say The TRICARE pharmacy contract is not a traditional PBM contract. It's a quote " 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 goes straight on through and that's how we protect the taxpayer. I taught contract law for many, many years. So what I wanna see is not how DOD summarizes this contract, or how the PBM summarizes this contract. I wanna see what the contract itself actually says. I wanted to see it, but DOD refuses to release the contract with Express Scripts. However, I have a copy of the contract that Express Scripts told the pharmacies that they would have to sign in twenty twenty two or they couldn't get any reimbursement and be a part of the system. And so you wanna be part of TRICARE, you had to sign this. So I just wanna take a look at one of those terms. Section three point five states that Express Scripts maintains the right to quote "aggregate reimbursement, reconciliation and offset methodology". Doctor Kotzner, you're the President of Express Scripts, so tell us, Does this mean that Express Scripts can adjust what they pay pharmacies after a claim has been processed?

Uh, appreciate the question, Senator. Uh, that's, uh, I haven't reviewed that, that document, and so that's a piece I would have to, to take back and evaluate to be able to give you a, a comprehensive answer on. If, if you're referring to, uh, things like clawbacks, we, we don't engage in,

I'm

in clawbacks.

I'm referring to ex exactly what the contract is that your company Express Scripts required pharmacies to sign if they wanted to be part of the network. And I'm just asking, does that mean after you've told the DOD, for example, and my example, that it was a hundred dollar prescription, that you can readjust that price with the pharmacy after the fact, say, down to seventy dollars, just sticking with the same example. Is that what that phrase means?

Senator, as as we we've we we've covered today, the the contract is a full pass through contract with

Well, that's what I'm trying to look at.

DHA.

I'm just looking at the language of what you tell the independent pharmacies who show up. Tell you what, let's ask a lawyer what it means. Uh, mister Reibold,

No, I'm serious.

you've been dealing with these contracts for a long time. Um, Express Scripts is supposed to reimburse the pharmacy at a predetermined price, a hundred dollars in my example. Is that what this contract language says?

Yeah, thank you, Senator Warren. Um, i- i- if I heard you correctly, you said that that contract language references aggregate reimbursement reconciliation an offset methodology. And wha- what I would say is that is, in about twenty years of practicing law, that might be the biggest smoking gun document I've seen in a hearing, right? Because what that means is they get to do post-adjudication offsets. So what they reimburse a pharmacy at the point of sale, they get to move it around. And with all due respect to Dr. Costner, you know, my understanding is for years he was over retail pharmacy networks, so this term shouldn't be a real surprise to him. But what I would say is this, when you take that provision, which gives them the right to move money around after the fact across plans, it's essentially we're talking about what? A complex shell game. We're talking about a Fortune twenty company playing a shell game that you see on the street corner in any city. And you combine that with the fact that in their own court admissions, they admit that they administer their retail network in a manner that's indistinguishable and indivisible from their other networks. And we know the OIG found in quote " pass through contracts and federal employee health plans" the spread pricing was there.

All right. So let's follow through on that because the contract shows that Express Scripts can do spread pricing in TRICARE, 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. 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 health plan found millions more in unallowable spread pricing. In other words, they've already been caught with their ca- hand in the cookie jar on this. But still, DOD claims that for TRICARE quote, all savings, meaning the difference between a hundred dollars and seventy dollars that you're getting, Doctor Langsford, go directly back to the government. to DOD. So, Doctor Costner, when Express Scripts exercises section three point five and retroactively reimburses uh retro uh and and uh retroactively lowers the reimbursement rates, are you contractually bound to pass that money through back to the DOD?

Appreciate the question, Senator. Our focus is administering the the contract with DHA. It's a hundred percent pass through a rate that we

So your pass is it your testimony today that when you tell Doctor Lansford that he is only gonna get seventy dollars and you've already told the DOD that it cost a hundred dollars, you get thirty dollars back from Doctor Lansford, a hundred and then thirty back. Are you telling us that every penny of that gets sent back to DOD? Is that your testimony today?

Senator, we we don't engage in spread pricing. This is a different type of contract with DHA.

That is a description of spread pricing. If you engage in no spread pricing, then you have a really easy one-word answer here. And that is that you are returning every penny when you retroactively adjust prices. Is that your testimony today?

Senator, this is a pass through arrangement contract and all savings goes back to

Is that your testimony today?

This is a pass-through arrangement contract and all savings goes back to DHA.

Well, if it is a pass alright, let's do it the other way then. If this is a pass-through arrangement would you support an independent public audit to verify that you are complying with full pass-through?

Our we're honored to be able to serve the the TRICARE beneficiaries

Yeah.

and the the government's business is is very important to us. And uh,

So I take it that's a yes?

we we wouldn't ge- we we're happy to comply that

You would support an independent audit to verify that every penny is going back to the government. Is that right? And that you're not using this clause in the contract. Is that right?

If Congress and DHA, I would like to do those those

I would like to do it. We are the oversight committee here. I'm I'm the member of Congress. This is my job, oversight. Will you agree to an audit?

Our our company will comply with what Congress and DHA does deem that we need to do.

So if we make then you will. You know, look, DOD and Express Scripts say there's no spread pricing in the TRICARE contract, but the same language that Express Scripts used to built other government plans out of millions of dollars is also present in TRICARE. We may well find that Express Scripts is playing the same games in TRICARE or not, But we can't tell without an independent audit. I am glad that we have a provision in this year's NDAA that will require an audit here. But frankly, I'm pretty outraged that you drag in billions of dollars from taxpayers and that you won't 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, yeah. Thank you, Mr. Chairman. I appreciate the extra time.

Thank you very much. Um, Dr. Langford, as a pharmacist who previously participated in Tracare Network and then made the decision to leave, can you walk us through the factors that led 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, uh, Senator. The direction of the industry has been unsustainable for a long time. Uh, PBMs, uh, and their vertically integrated organizations, um, take every opportunity to, to underpay and compromise the, the local health care networks that already are in place and exist. In this particular instance, it would have become the worst contract that we would have been a part of, uh, only second to New Mexico Medicaid at the time, which later went on to recognize the problem with about half of the, the rural pharmacies in the state closing over a short time frame, and they passed legislation fixing it, uh, a NADAC plus model that supports pharmacies staying in business.