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Statement of Need: This proposed rule implements changes as directed by the enactment of NDAA for FY08 (January 28, 2008) to the extent necessary to ensure pharmaceuticals paid for by the DoD that are provided by pharmacies under the TRICARE Retail Pharmacy Program (TRRx) to eligible beneficiaries are subject to the pricing standards under section 8126 of title 38 United States Code.

Summary of the Legal Basis: This proposed rule implements Section 703 of the National Defense Authorization Act for Fiscal Year 2008 (NDAA-08) (Public Law 110-181).

Alternatives: The Department is initiating the proposed changes consistent with clear congressional direction.

Anticipated Costs and Benefits: This regulation will extend federal ceiling prices (FCP) to eligible prescriptions dispensed through the TRICARE retail pharmacy network. This change represents hundreds of millions of dollars annually in government savings while remaining transparent to beneficiaries and the retail pharmacy network. The cost to administer this program is very small compared to the cost savings it will generate.

Risks: This regulation helps to mitigate the long term financial risks associated with sustaining the TRICARE pharmacy benefit. By obtaining consistent and favorable pricing at the retail, mail, and MTF points of service, the overall growth in program costs should slow. Price normalization among military treatment facilities, TRICARE Mail Order Pharmacy (TMOP), and the TRRx is possible; maintaining a competitive Uniform Formulary process mitigates this risk. We believe there is sufficient competition among pharmaceutical manufacturers to keep acquisition costs low for all points of service available through the TRICARE Pharmacy Benefits Program.