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• TRICARE could realize significant savings by steering prescribers and patients to generic alternatives within broader therapeutic classes.
• There is broad overlap in the classes of drugs used in TRICARE and the Veterans Health Administration (VHA). Increased formulary and acquisition harmonization between TRICARE and the VHA could lead to cost savings.
• Adopting TRICARE's narrower specialty pharmacy network for all prescription drugs would allow for further price reductions through lower dispensing fees, although the trade-offs between savings and access would have to be carefully studied.
• The U.S. Department of Defense (DoD) should take full advantage of lower prices when drugs are acquired directly by DoD. DoD should explore whether it is possible to dispense directly acquired drugs (when purchased at unit prices) through retail pharmacies and to shift specialty drug dispensing and administration to military treatment facilities under TRICARE's medical benefit.

The Military Health System provides health coverage — including prescription drug benefits — through the TRICARE program, which served an estimated 9.5 million beneficiaries in fiscal year 2018. Like commercial insurance and other sources of drug coverage, TRICARE uses formularies and other policies and tools to strike a balance between access to prescription drugs — in terms of which drugs are covered and where enrollees can receive drugs — and spending. Spending on prescription drugs typically increases as drug access becomes more generous. Unlike other sources of prescription drug coverage, TRICARE must also balance direct acquisition and distribution of drugs via military treatment facilities and mail-order pharmacies with payment for drugs dispensed in retail pharmacies. This report describes the TRICARE pharmacy benefit and the trade-offs in TRICARE pharmacy policies between increasing access and controlling costs. It presents six approaches that TRICARE should explore further to improve access, control costs, or both, including a more selective formulary, narrower pharmacy networks, and further harmonization with other federal purchasers, such as the Veterans Health Administration (VHA). These approaches are worth exploring in light of the recompetition of the TRICARE pharmacy contract and the ongoing consolidation of authority and management for purchased care under the Defense Health Agency.

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