From June 2016 through September 2017, the Department of Defense Office of Inspector General (OIG) conducted a performance audit of the Defense Health Agency (DHA), the agency responsible for the effective implementation of the Department of Defense (DoD) pharmacy benefit under TRICARE. The audit was initiated to determine if DHA had adequate controls in place to identify individual drugs at high risk of fraud or abuse and thereby prevent increased drug costs to the pharmacy benefit program.

In a report of findings issued last week, OIG found that while DHA had made some process improvements, particularly in placing new prior authorization requirements and quantity limits on some drugs, in other instances it often took significant amounts of time to implement new quantity limits or prior authorizations on other drugs that were spiking pharmacy benefit costs.

The report found positive signs in the DHAs implementation in 2015 of a prior authorization process for compound drugs (a process that produced a savings of hundreds of millions of dollars in just a few months), but also noted that the lessons learned from that process had not been internalized and translated when it came to non-compound drugs.

The OIG report established that the DHA effectively used data analytics, trend reports and industry publications to identify drugs with increasing costs. However, the DHA often took more than 6 months to implement new quantity limits or prior authorization requirements for some of the drugs that showed troubling cost increases. According to the report, this delay was caused by the DHA Director’s refusal to implement new quantity limits without multiple reviews, deferring instead to recommendations by the Pharmacy and Therapeutics Committee (P&T Committee), which often took months to obtain.

As noted in the report, the Director, DHA, is under no regulatory obligation to delay the immediate implementation of quantity limitations when the situation warrants, nor to await decisions by the P&T Committee. Accordingly, the OIG recommended that DHA implement procedures allowing expedited placement of temporary quantity limits to address future instances of rapidly rising drug costs until the P&E Committee meets and develops solutions that are more permanent.

Interestingly, and no doubt as a direct response to the OIG audit, DHS did in fact adopt an expedited process to quickly address any rising costs on individual drugs several months in advance of the report’s release.

The FisherBroyles Pharmacy and Health Care Law team is pleased to track important statutory, regulatory, and administrative matters as they relate to the pharmaceutical and health care industries. We welcome your questions. Please contact any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler

Katy Wane, FisherBroyles Partner
Katy Wane