TRICARE Pharmacy Services contract awarded to Express Scripts Inc. for over $671 million

Contract Overview

Contract Amount: $671,426,040 ($671.4M)

Contractor: Express Scripts Inc

Awarding Agency: Department of Defense

Start Date: 2020-04-06

End Date: 2021-04-30

Contract Duration: 389 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: 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 $671.4 million to EXPRESS SCRIPTS INC for work described as: TRICARE PHARMACY SERVICES Key points: 1. The contract value represents a significant investment in ensuring pharmaceutical access for military personnel and their families. 2. Competition dynamics for large-scale pharmacy benefit management contracts can be intense, potentially driving favorable pricing. 3. Performance context is crucial, as timely and accurate prescription fulfillment directly impacts beneficiary health outcomes. 4. This contract positions Express Scripts Inc. as a key player in the government healthcare sector. 5. The firm fixed-price structure shifts cost risk to the contractor, providing budget certainty for the government.

Value Assessment

Rating: good

Benchmarking the value of this contract requires comparison to similar large-scale pharmacy benefit management contracts within the federal government and the private sector. Given the scope of TRICARE beneficiaries, the $671 million award appears to be within a reasonable range for comprehensive pharmacy services. The firm fixed-price nature of the contract suggests a degree of pricing predictability, though the ultimate value realized depends on utilization and the efficiency of the contractor's network.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. This process is designed to foster a competitive environment, encouraging bidders to offer their best pricing and technical solutions. The level of competition can influence the final award price and the quality of services provided.

Taxpayer Impact: Full and open competition generally benefits taxpayers by promoting a more efficient allocation of resources and potentially lower costs through competitive bidding.

Public Impact

Military beneficiaries and their families gain access to prescription medications through the TRICARE pharmacy network. The contract ensures the provision of pharmacy benefit management services, including claims processing and formulary management. Geographic impact is nationwide, covering all TRICARE-eligible individuals. Workforce implications include the potential for employment within Express Scripts Inc.'s pharmacy network and administrative operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for increased drug costs if utilization exceeds projections under a fixed-price contract.
Ensuring consistent quality of service across a large and diverse beneficiary population can be challenging.
Dependence on a single large contractor for a critical health service introduces systemic risk.

Positive Signals

Firm fixed-price contract provides budget certainty for the government.
Full and open competition suggests a robust bidding process that could lead to cost efficiencies.
Express Scripts Inc. is a major player in pharmacy benefit management, suggesting established infrastructure and expertise.

Sector Analysis

The federal healthcare sector, particularly programs serving large populations like TRICARE, represents a substantial market for pharmacy benefit managers (PBMs). These contracts are critical for managing prescription drug costs and ensuring access to medications for beneficiaries. Comparable spending benchmarks would involve analyzing other large government health contracts and private sector PBM agreements, which often run into billions of dollars annually.

Small Business Impact

While this contract was awarded under full and open competition and does not appear to have specific small business set-aside provisions, large prime contractors like Express Scripts Inc. are often required to meet subcontracting goals. These goals aim to ensure that small businesses have opportunities to participate in the delivery of services. The impact on the small business ecosystem depends on the specific subcontracting opportunities created and the ability of small businesses to compete for those subcontracts.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Health Agency (DHA), a component of the Department of Defense. Accountability measures would include performance metrics, service level agreements, and regular reporting requirements. Transparency is facilitated through contract awards databases and potentially through public reporting on program performance. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

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

Risk Flags

Contract Value
Contract Duration
Contract Type

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $671.4 million to EXPRESS SCRIPTS INC. 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 $671.4 million.

What is the period of performance?

Start: 2020-04-06. End: 2021-04-30.

What is the historical spending trend for TRICARE pharmacy services over the past five years?

Analyzing historical spending for TRICARE pharmacy services requires access to detailed federal procurement data. Generally, spending in this category can fluctuate based on beneficiary enrollment, drug utilization trends, formulary changes, and contract awards. Large contracts like the one awarded to Express Scripts Inc. often span multiple years, contributing significantly to annual spending figures. Without specific historical data for this exact contract or the broader TRICARE pharmacy program, it's difficult to provide precise figures. However, federal healthcare spending, particularly on pharmaceuticals, has generally seen an upward trend due to an aging population, advancements in medical treatments, and increasing prescription drug costs. The government continuously seeks efficiencies through competitive contracting and negotiation to manage these rising costs.

How does the pricing structure of this contract compare to similar private sector pharmacy benefit management contracts?

Comparing the pricing structure of this federal contract to private sector equivalents is complex due to proprietary information and differing service scopes. However, federal contracts, especially those awarded through full and open competition, aim for transparency and cost-effectiveness. The firm fixed-price (FFP) nature of this award means the government pays a set amount, shifting cost risk to the contractor. Private sector contracts can vary widely, including FFP, cost-plus, or hybrid models, often with negotiated rebates and discounts that are not always publicly disclosed. Government contracts may also include specific performance incentives or penalties tied to health outcomes or service delivery standards. While direct apples-to-apples comparisons are challenging, the government's procurement process is designed to achieve competitive pricing, potentially leveraging its large purchasing power.

What are the key performance indicators (KPIs) used to evaluate the contractor's performance under this TRICARE pharmacy services contract?

Key Performance Indicators (KPIs) for a contract of this magnitude typically focus on ensuring timely, accurate, and cost-effective delivery of pharmacy services to TRICARE beneficiaries. Common KPIs include prescription fulfillment accuracy rates, turnaround times for claims processing, network pharmacy availability, beneficiary satisfaction scores, and adherence to formulary guidelines. Cost containment measures, such as generic dispensing rates and effective management of high-cost specialty drugs, are also critical. The Defense Health Agency (DHA) would establish specific targets for these KPIs, and the contractor's performance against these metrics would be regularly assessed. Failure to meet performance standards could result in penalties or impact future contract renewals.

What is the potential impact of this contract on the overall cost of healthcare for the Department of Defense?

This contract plays a significant role in managing the overall cost of healthcare for the Department of Defense (DoD) by controlling prescription drug expenditures. By outsourcing pharmacy benefit management to a large, specialized contractor like Express Scripts Inc., the DoD aims to leverage economies of scale, negotiate favorable drug pricing, and implement efficient claims processing. The firm fixed-price structure provides budget certainty, preventing unexpected cost overruns related to drug prices. However, the total cost is influenced by beneficiary utilization patterns. Effective management of this contract, including robust oversight and performance monitoring, is crucial to ensuring that it delivers value for money and contributes to the DoD's efforts to provide comprehensive healthcare services within budgetary constraints.

Are there any specific provisions within this contract related to drug formulary management and cost-saving strategies?

Contracts for large-scale pharmacy benefit management, such as this TRICARE pharmacy services agreement, invariably include provisions for drug formulary management and cost-saving strategies. The contractor is typically responsible for developing and maintaining a comprehensive drug formulary that balances clinical efficacy with cost-effectiveness. This often involves tiered drug lists, preferred drug programs, and utilization management tools like prior authorization and step therapy. Furthermore, significant emphasis is placed on maximizing the use of lower-cost generic and biosimilar medications. The contractor also negotiates rebates with pharmaceutical manufacturers, which are a critical component of reducing the net cost of prescription drugs for the government. The specific details of these strategies and rebate agreements are often proprietary but are subject to government oversight.

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: $671,426,040

Exercised Options: $671,426,040

Current Obligation: $671,426,040

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