Cigna’s Express Scripts Pressured Over TRICARE Contract in Senate Hearing

Lawmakers questioned whether Express Scripts' contract with the Pentagon allows the company to overcharge taxpayers and military families while nickel-and-diming independent pharmacies.

A Senate Armed Services Subcommittee on Personnel hearing last week highlighted growing concerns about the Pentagon’s relationship with Cigna’s Express Scripts, the pharmacy benefit manager (PBM) that oversees the military’s TRICARE pharmacy program.

Express Scripts is the nation’s largest PBM and serves as the exclusive administrator of TRICARE’s pharmacy benefit, overseeing prescription drug coverage for roughly 9.6 million active-duty service members, military retirees and their families. The company is owned by Evernorth, Cigna’s health services subsidiary. Cigna acquired Express Scripts in 2018 for $67 billion. Since then, parent company Cigna has swallowed nearly 30% of the pharmacy benefit market.

That acquisition helped create one of the country’s largest vertically integrated health care conglomerates. Today, Cigna owns the insurer (Cigna Healthcare), the PBM (Express Scripts), specialty pharmacies (Accredo Specialty Pharmacy), mail-order pharmacies (Express Scripts Pharmacy), prior authorization management (eviCore healthcare) and a growing network of health care services businesses (Evernorth Behavioral Care Group, MDLIVE) under the Evernorth umbrella.

A skim of the hearing

During the hearing, Sen. Elizabeth Warren (D-Mass.) pressed Express Scripts President Dr. Adam Kautzner about contract provisions that appear to allow the company to retroactively adjust pharmacy reimbursements, a practice that independent watchdog investigations have previously linked to unallowable spread pricing in other government health plans.

“I’m pretty outraged that you drag in billions of dollars from taxpayers and that you won’t submit to an audit when it’s clear that you have the opportunity to bilk the federal government,” Warren said.

Witness Dr. Micah Lansford, a pharmacist and owner of Roden-Smith Pharmacy, was recently forced out of the TRICARE program. When asked by Sen. Tommy Tuberville (R-Ala.) why Lansford’s pharmacy (like many other independents) was forced out, Landsford said:

“The direction of the [PBM] industry has been unsustainable for a long time. PBMs and their vertically integrated organizations [big insurance companies] take every opportunity to underpay and compromise the local health care networks that are already in place and exist.”

In this particular instance – it [TRICARE] would have become the worst contract that we would have been a part of.”

One of the main focuses of the hearing was on contract language that senators said appears to permit Express Scripts to go back after a prescription has already been processed and change how much it pays pharmacies, potentially keeping the difference instead of returning it to the government.

Witness Greg Reybold, vice president of public policy at the American Pharmacy Cooperative Inc., described the provision as a “smoking gun,” in what he characterized as a “complex shell game.”

At least two federal watchdog investigations have previously found that Express Scripts engaged in spread pricing while administering prescription benefits for government employee health plans and failed to pass through all savings to the government despite contract provisions that appeared to require it to do so.

According to Warren, some medications that cost only a few dollars are still subject to TRICARE’s standard $14 mail-order copayment, potentially allowing Express Scripts to collect both the patient’s copay and administrative fees from the federal government. The arrangement also calls into question whether the company that manages the government’s pharmacy benefit (in this case, Express Scripts) should also own the pharmacies (Express Scripts Pharmacy, Accredo Specialty Pharmacy) that dispense medications under that benefit.

“Why on Earth is DOD requiring vertical integration so that the very company that’s supposed to be doing the managing also owns the pharmacy?” Warren asked Defense Health Agency Deputy Director Dr. David Smith. Smith acknowledged that it was “reasonable” for the Defense Department to reexamine the structure of its contract with Express Scripts as it prepares for future negotiations.

This could be fixed now

The hearing is the latest sign that concerns about health care consolidation and vertically integrated health care giants are gaining bipartisan traction in Washington.

Earlier this year, Warren and Sen. Josh Hawley (R-Mo.) introduced the Break Up Big Medicine Act, legislation that would prohibit health insurers, PBMs and pharmacy companies from owning one another and force large conglomerates to divest parts of their businesses.

The proposal would directly target companies such as Cigna and Express Scripts, as well as UnitedHealth Group and its huge and hugely profitable Optum division, and CVS Health whose sprawling corporate structures increasingly combine insurance (Aetna), pharmacy benefit management (Caremark), care delivery (Oak Street Health), pharmacies (CVS Pharmacy) and other health care services (Signify Health) under one roof.