DoD's TRICARE Pharmacy Services contract awarded to Express Scripts Inc. for over $691 million

Contract Overview

Contract Amount: $691,332,132 ($691.3M)

Contractor: Express Scripts Inc

Awarding Agency: Department of Defense

Start Date: 2017-03-23

End Date: 2018-04-30

Contract Duration: 403 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: IGF::OT::IGF TRICARE PHARMACY SERVICES

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63121

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $691.3 million to EXPRESS SCRIPTS INC for work described as: IGF::OT::IGF TRICARE PHARMACY SERVICES Key points: 1. The contract represents a significant investment in ensuring pharmaceutical access for military personnel and their families. 2. Competition dynamics for large-scale healthcare contracts can influence pricing and service innovation. 3. Performance context is crucial for understanding the effectiveness of pharmacy benefit management in a large federal program. 4. Sector positioning highlights the critical role of private contractors in delivering essential healthcare services. 5. Risk indicators may include potential for cost overruns, service disruptions, and beneficiary satisfaction.

Value Assessment

Rating: good

The total award amount of over $691 million for TRICARE Pharmacy Services is substantial, reflecting the scale of the program. Benchmarking this against other large federal pharmacy contracts or private sector equivalents would provide a clearer picture of value for money. Given the fixed-price nature, the contractor bears much of the cost risk, which can be a positive indicator if managed effectively. However, detailed analysis of unit costs for specific drugs and services would be needed for a definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a robust bidding process. This typically allows for a wider range of potential contractors to submit proposals, fostering a competitive environment that can lead to better pricing and service offerings. The number of bidders and the specifics of the evaluation criteria would further illuminate the strength of the competition.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces and encouraging innovative solutions from multiple providers.

Public Impact

Beneficiaries include active duty military personnel, retirees, and their families who rely on TRICARE for healthcare. Services delivered encompass the management of prescription drug benefits, including claims processing, network pharmacy management, and mail-order pharmacy services. Geographic impact is nationwide, covering all eligible TRICARE beneficiaries within the United States. Workforce implications may involve the employment of pharmacists, technicians, and administrative staff by the contractor and its network pharmacies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for increased drug costs if not managed aggressively.
Risk of service disruptions impacting beneficiary access to medications.
Ensuring data security and privacy for sensitive health information.

Positive Signals

Contract awarded through full and open competition, suggesting competitive pricing.
Fixed-price contract structure shifts cost risk to the contractor.
Large scale of operations may lead to economies of scale.

Sector Analysis

The healthcare sector, particularly within government programs, relies heavily on large-scale contracts for pharmacy benefit management. This contract fits within the broader landscape of federal healthcare spending, which aims to provide comprehensive medical services to beneficiaries. Comparable spending benchmarks would involve looking at other large pharmacy benefit manager (PBM) contracts, both federal and commercial, to assess cost-effectiveness and operational efficiency.

Small Business Impact

While this contract is a large prime award, the potential for small business participation exists through subcontracting opportunities. The prime contractor, Express Scripts Inc., may engage small businesses for various support services. Analysis of subcontracting plans and actual performance would reveal the extent of small business involvement and its impact on the small business ecosystem within the healthcare support services industry.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Health Agency (DHA), a component of the Department of Defense. Accountability measures would be embedded in the contract's performance work statement (PWS), with defined metrics and remedies for non-performance. Transparency is typically facilitated through contract awards databases and potentially Inspector General reports if specific issues arise.

Related Government Programs

TRICARE Pharmacy Benefit Management
Department of Defense Healthcare Contracts
Federal Pharmacy Services
Express Scripts Contracts

Risk Flags

Potential for cost escalation in pharmaceutical spending.
Ensuring beneficiary access to medications across the network.
Data security and privacy compliance for sensitive health information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $691.3 million to EXPRESS SCRIPTS INC. IGF::OT::IGF TRICARE PHARMACY SERVICES

Who is the contractor on this award?

The obligated recipient is EXPRESS SCRIPTS INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $691.3 million.

What is the period of performance?

Start: 2017-03-23. End: 2018-04-30.

What is the historical spending trend for TRICARE Pharmacy Services under Express Scripts Inc.?

Historical spending data for TRICARE Pharmacy Services under Express Scripts Inc. would reveal the total value of contracts awarded over time. This analysis would involve examining contract modifications, delivery orders, and cumulative award amounts. Understanding spending trends can highlight periods of significant program expansion, cost fluctuations, or changes in service scope. For instance, a steady increase in spending might indicate growing beneficiary enrollment or rising drug costs, while a decrease could suggest cost-saving initiatives or a reduction in services. Comparing these trends to overall TRICARE program spending or national healthcare expenditure trends would provide valuable context for assessing the contract's financial trajectory and its impact on the federal budget.

How does the per-unit cost of common generic and brand-name drugs under this contract compare to Medicare Part D or commercial PBM benchmarks?

Comparing the per-unit cost of drugs under this TRICARE contract to benchmarks like Medicare Part D or commercial PBMs is crucial for assessing value for money. This requires detailed data on drug acquisition costs, dispensing fees, and rebate pass-throughs for a representative basket of generic and brand-name medications. If TRICARE's costs are significantly higher, it could indicate less favorable pricing negotiations, higher administrative overhead, or a different drug formulary. Conversely, lower costs might suggest effective negotiation leverage due to the large volume of beneficiaries or specific contract provisions. Such comparisons help identify potential areas for cost savings and ensure that taxpayer dollars are being used efficiently to provide essential pharmaceutical benefits to military families and retirees.

What are the key performance indicators (KPIs) for this contract, and how has Express Scripts Inc. historically performed against them?

Key performance indicators (KPIs) for the TRICARE Pharmacy Services contract typically focus on areas such as prescription fulfillment rates, drug availability, beneficiary satisfaction, claims processing accuracy, and adherence to formulary requirements. Historical performance data, often found in contract performance reports or Inspector General audits, would detail Express Scripts Inc.'s success in meeting these metrics. Consistent high performance against KPIs suggests effective contract management and service delivery. Conversely, recurring failures or deficiencies in meeting KPIs could signal operational issues, inadequate resource allocation, or a need for corrective actions, potentially impacting beneficiary access to care and overall program efficiency. Analyzing these KPIs provides insight into the contractor's reliability and the overall effectiveness of the pharmacy benefit management.

What is the potential impact of this contract on the broader pharmaceutical supply chain and drug pricing?

A contract of this magnitude, managed by a major PBM like Express Scripts Inc. for the Department of Defense, can significantly influence the pharmaceutical supply chain and drug pricing dynamics. The sheer volume of prescriptions processed can give the contractor substantial leverage in negotiating prices with drug manufacturers and wholesalers. This leverage can lead to lower acquisition costs for the government, potentially setting a precedent or influencing pricing strategies across the industry. Furthermore, the contract's terms regarding formulary management, therapeutic substitutions, and the promotion of generics can shape prescribing patterns and market share for different medications. The PBM's role in managing the supply chain also extends to ensuring the integrity and security of drug distribution, which is critical for patient safety.

Are there any known risks or challenges associated with Express Scripts Inc.'s performance on similar large-scale government healthcare contracts?

Assessing risks associated with Express Scripts Inc.'s performance on similar large-scale government healthcare contracts involves reviewing past contract performance evaluations, GAO reports, and IG audits. Potential challenges could include issues related to claims processing accuracy, drug cost containment, beneficiary access to network pharmacies, data security breaches, or difficulties in adapting to evolving healthcare regulations. For instance, past contracts might have faced scrutiny over rebate transparency or the effectiveness of cost-saving measures. Understanding these historical challenges provides a basis for evaluating the current TRICARE contract's risk profile and identifying areas where proactive oversight and management are essential to ensure successful outcomes and protect taxpayer interests.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HT940213R0001

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Priority Healthcare Distribution Inc

Address: 1 EXPRESS WAY, SAINT LOUIS, MO, 63121

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $691,332,132

Exercised Options: $691,332,132

Current Obligation: $691,332,132

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HT940214D0002

IDV Type: IDC

Timeline