**Senate Calls for Independent Audit of TRICARE Pharmacy Program Amid Conflict of Interest Concerns**
The U.S. Senate Armed Services Committee has included a provision in its fiscal 2027 defense policy bill demanding an independent audit of the Department of Defense’s (DoD) trillion-dollar TRICARE pharmacy program. This move follows significant concerns raised by lawmakers regarding the role of Express Scripts—the program’s longtime Pharmacy Benefit Manager (PBM)—and potential conflicts of interest.
### The Heart of the Issue
Under the current arrangement, Express Scripts not only serves as TRICARE’s PBM, deciding which pharmacies can participate in the network and negotiating reimbursement rates, but also operates its own mail-order and specialty pharmacies. This dual role places the company in direct competition with other pharmacies within the TRICARE network, creating what Senator Elizabeth Warren (D-Mass.) termed a “pretty clear conflict of interest.”
During a Senate Armed Services Committee hearing, Senator Warren and other lawmakers scrutinized the structure of the program, particularly after the DoD revised its contract with Express Scripts. The new agreement reduced the minimum number of in-network pharmacies from 50,000 to 35,000. As a result, approximately 15,000 independent and community pharmacies, many in underserved rural and urban areas, have left the TRICARE network after facing drastically reduced reimbursement rates.
Dr. Micah Lansford, a pharmacist and owner of Roden-Smith Pharmacy in Clovis, New Mexico, testified that the reduced rates would have caused him significant financial losses. “No contractor should be allowed to referee a game while also competing in it,” he said, emphasizing the negative impact on military families.
### Key Revelations
One provision within Express Scripts’ contract with TRICARE has drawn particular scrutiny. It allows the contractor to “aggregate reimbursement reconciliation and offset methodology,” enabling them to adjust payments to pharmacies after claims are processed. Greg Reybold, vice president of the American Pharmacy Cooperative, described the practice as akin to a “complex shell game,” where payments can be moved around post-adjudication.
This concern is compounded by prior findings from inspector general audits, which identified spread pricing issues in other federal health programs administered by Express Scripts. Spread pricing involves charging payers more for prescriptions than what is paid to pharmacies, retaining the difference. In 2024, the Office of Personnel Management inspector general found that Express Scripts had overcharged the American Postal Workers Union Health Plan and the federal government by approximately $45 million.
### Response and Pushback
Adam Kautzner, president of Express Scripts and Evernorth Care Management, denied engaging in spread pricing, stating that the contractor “does not engage in spread pricing.” However, Warren countered that the same language in the TRICARE contract—which allows for financial adjustments and offsets—has been used to “milk other government plans out of millions of dollars.”
DoD officials defended the arrangement, arguing that the TRICARE pharmacy program operates differently from commercial PBM models because the Defense Department controls pricing while Express Scripts provides administrative services. David Smith, acting director of the Defense Health Agency, described the agency as essentially the PBM.
### A Call for Change
Senator Warren emphasized that “vertically integrated PBMs have every incentive to line their own pockets” and urged the DoD to prohibit such structures in the next-generation TRICARE pharmacy contract. Despite these concerns, the DoD has yet to provide Congress with all the requested details regarding the terms of its contract with Express Scripts, citing proprietary information.
### FAQ Section
**Q: Why is the Senate calling for an independent audit of TRICARE’s pharmacy program?**
The Senate is pushing for an audit due to concerns over a potential conflict of interest. Express Scripts, the contractor managing TRICARE’s pharmacy benefits, also operates its own pharmacies, which compete with other pharmacies in the network.
**Q: What is “spread pricing”?**
Spread pricing occurs when a pharmacy benefit manager charges payers more for a prescription than it pays the pharmacy, keeping the difference as profit.
**Q: How has the contract with Express Scripts affected pharmacies?**
The contract changes allowed Express Scripts to reduce the minimum number of in-network pharmacies from 50,000 to 35,000 and lower reimbursement rates. This has led to approximately 15,000 pharmacies leaving the TRICARE network, particularly impacting rural and urban underserved areas.
**Q: What is the DoD’s defense of the current system?**
Defense officials argue that TRICARE operates differently from commercial PBM models because the government controls pricing, while Express Scripts handles administrative tasks.
### Conclusion
The call for an independent audit of the TRICARE pharmacy program underscores the growing concerns about conflicts of interest and transparency in federal healthcare programs. As Senator Warren and others have argued, ensuring that taxpayer dollars are not funneled into practices that disadvantage both competitors and military families is a critical priority. With the DoD planning for the next-generation TRICARE pharmacy contract, the push for greater accountability and structural changes remains as urgent as ever.
