TRICARE Pharmacy Services contract awarded to Express Scripts Inc. for over $692 million

Contract Overview

Contract Amount: $692,375,071 ($692.4M)

Contractor: Express Scripts Inc

Awarding Agency: Department of Defense

Start Date: 2021-03-19

End Date: 2022-04-30

Contract Duration: 407 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 $692.4 million to EXPRESS SCRIPTS INC for work described as: TRICARE PHARMACY SERVICES Key points: 1. Contract value represents significant investment in healthcare services for military personnel and families. 2. Full and open competition suggests a robust bidding process, potentially leading to better pricing. 3. Fixed-price contract type offers cost certainty for the government. 4. Contract duration of over a year indicates a substantial operational requirement. 5. Awarded by the Defense Health Agency, highlighting its critical role in military healthcare. 6. The North American Industry Classification System (NAICS) code 524114 points to direct health and medical insurance carriers.

Value Assessment

Rating: good

The contract value of over $692 million for TRICARE Pharmacy Services is substantial, reflecting the scale of healthcare needs for military beneficiaries. Benchmarking against similar large-scale pharmacy benefit management contracts is crucial for a precise value assessment. However, the firm fixed-price nature of the award provides a degree of cost predictability for the government, which is a positive indicator. Further analysis would involve comparing the per-unit costs of dispensed medications and administrative fees against industry averages and historical TRICARE performance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. This approach typically fosters a competitive environment, encouraging multiple bidders to offer their best pricing and service terms to secure the award. The specific number of bidders is not provided, but the designation suggests a healthy level of market interest and potential for price discovery.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces and ensuring the government receives competitive pricing for essential services.

Public Impact

Military personnel, veterans, and their families benefit from access to prescription medications and pharmacy services. The contract ensures the continuity and efficiency of the TRICARE pharmacy benefit program. Services are likely delivered nationwide, supporting beneficiaries across various geographic locations. The contract supports jobs within the healthcare and pharmacy benefit management sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Ensuring consistent quality of service across all TRICARE beneficiaries.
Managing the complexity of a large-scale pharmacy benefit program.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm fixed-price contract provides cost certainty.
Managed by the Defense Health Agency, indicating strategic alignment with military healthcare goals.

Sector Analysis

This contract falls within the healthcare sector, specifically focusing on pharmacy benefit management (PBM) services. The PBM market is a significant segment of the broader healthcare industry, responsible for managing prescription drug benefits on behalf of health insurers, Medicare Part D plans, and large employers. The scale of this contract suggests Express Scripts Inc. is a major player in this market, handling a substantial volume of prescriptions and claims for a large beneficiary population. Comparable spending benchmarks would involve looking at other large government PBM contracts or private sector equivalents.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large-scale contract awarded through full and open competition, the primary contractor, Express Scripts Inc., is likely responsible for managing subcontracting opportunities. Analysis of subcontracting plans and performance would be necessary to determine the extent of small business participation and its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Health Agency (DHA), which is responsible for the TRICARE program. Mechanisms likely include performance monitoring, quality assurance reviews, and contract compliance checks. Transparency is generally maintained through contract awards databases and reporting requirements. The Inspector General of the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

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

Risk Flags

Contract Value
Contract Duration
Contract Type
Competition Level

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $692.4 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 $692.4 million.

What is the period of performance?

Start: 2021-03-19. End: 2022-04-30.

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

Analyzing historical spending for TRICARE Pharmacy Services is crucial for understanding cost trends and identifying potential anomalies. Without specific historical data points for this contract or previous iterations, a comprehensive trend analysis is not possible. However, given the scale of the current award ($692 million), it is reasonable to infer that spending in this category has been substantial and likely follows general trends in healthcare costs and pharmaceutical utilization. Factors such as changes in beneficiary population, drug formularies, and contract terms would influence year-over-year spending. A detailed review of past contract awards and modifications for TRICARE pharmacy services would be necessary to establish a precise spending trajectory and identify any significant deviations or cost-saving initiatives.

How does the pricing structure of this contract compare to other large government pharmacy benefit management contracts?

The pricing structure of this TRICARE Pharmacy Services contract, identified as Firm Fixed Price (FFP), offers cost certainty to the government. To compare its value, we would need to benchmark it against similar FFP contracts for pharmacy benefit management (PBM) services awarded by other federal agencies or large state programs. Key comparison points include the administrative fees charged per prescription or per member per month, dispensing fees, and the negotiated drug costs (often based on Average Wholesale Price or other benchmarks). Express Scripts Inc. is a major PBM provider, and their pricing is generally competitive within the market. However, without access to the specific rates and discounts negotiated in this contract, a direct comparison is challenging. The fact that it was awarded under full and open competition suggests that the pricing was deemed competitive at the time of award.

What are the key performance indicators (KPIs) used to evaluate the performance of Express Scripts Inc. under this contract?

While the specific Key Performance Indicators (KPIs) for this TRICARE Pharmacy Services contract are not detailed in the provided data, typical KPIs for PBM contracts include metrics related to prescription fulfillment accuracy, timeliness of claims processing, member satisfaction, formulary compliance, and cost containment. For a contract of this magnitude managed by the Defense Health Agency, performance would likely be rigorously monitored. This could involve tracking metrics such as the percentage of prescriptions filled within a certain timeframe, the accuracy rate of claims adjudication, the number of member inquiries resolved, and adherence to established drug utilization review protocols. Performance would also be assessed against contractual obligations regarding network pharmacy access and patient safety standards. Regular performance reviews and audits would be conducted to ensure Express Scripts Inc. is meeting or exceeding these critical benchmarks.

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

This contract, representing over $692 million in pharmacy services for TRICARE beneficiaries, has a notable impact on the pharmaceutical supply chain and drug pricing. As a large purchaser, the Defense Health Agency, through Express Scripts Inc., wields significant negotiating power. This allows for potentially lower drug costs through volume discounts and formulary management. The contract's terms likely influence how drug manufacturers price their products for this specific market segment. Furthermore, the operational scale of managing prescriptions for a large military population can affect the demand for certain medications, indirectly influencing supply chain dynamics. The contract's success in controlling costs can also set precedents for other large healthcare purchasers, potentially driving broader trends in drug pricing and supply chain efficiency within the healthcare sector.

Are there any identified risks associated with the contractor's performance or the contract's execution?

The provided data does not explicitly list risks associated with Express Scripts Inc.'s performance or the execution of this specific TRICARE Pharmacy Services contract. However, general risks inherent in large-scale PBM contracts include potential for cost overruns if not managed tightly (though mitigated by FFP), challenges in maintaining member satisfaction with pharmacy access and services, and the risk of cybersecurity breaches impacting sensitive health information. Ensuring compliance with evolving healthcare regulations and maintaining an accurate and up-to-date drug formulary are also ongoing challenges. The 'full and open competition' award suggests a competitive landscape, which can mitigate some risks by ensuring a viable alternative if performance issues arise. Continuous monitoring by the Defense Health Agency is essential to identify and address any emerging risks proactively.

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: $692,375,071

Exercised Options: $692,375,071

Current Obligation: $692,375,071

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