Who Is TRICARE's Pharmacy Deal Really Built For? Senators Say the Math Doesn't Add Up

For more than two decades, Express Scripts has quietly run the machinery behind nearly every prescription filled by a service member, military retiree, or military family member in the country. On July 15, the machinery got a very public inspection, and senators on both sides of the aisle didn't like what they found.

At a hearing of the Senate Armed Services Subcommittee on Personnel, lawmakers pressed Defense Health Agency officials and Express Scripts' own president on a question that sounds simple but carries multibillion-dollar consequences: Is the country's largest pharmacy benefit manager (PBM) administering the TRICARE pharmacy program in the interest of military families, or in the interest of Express Scripts' own mail-order and specialty pharmacies?

"That is a clear conflict of interest," said Sen. Elizabeth Warren, D-Mass., the subcommittee's ranking member, describing a Defense Department requirement that forces its PBM contractor to also own and operate pharmacies competing in the same network it administers.

"It's an open invitation for Express Scripts to milk the federal government, kick out competitors, and steer big bucks to itself."

That conflict, Warren argued, isn't just about who profits; it's about who controls the numbers used to justify the arrangement in the first place. Because Express Scripts operates as both referee and player, it's also the primary source of the cost data the DoD relies on to compare mail-order pharmacy against retail dispensing. Dr. Micah Lansford, the New Mexico pharmacist forced out of the network in 2023, testified that this arrangement inverts the reality he sees at the counter every day.

"It's cheaper for me to dispense generic drugs than any mail order can, by far," said Lansford.

"So, the problem is that the Express Scripts PBM is providing all of the data [on the cost of mail order pharmacies] because they control all of the levers. They're the ones saying it's more expensive to fill in a local pharmacy than it is by mail."

Republicans on the panel weren't defending the status quo, either. Subcommittee Chairman Tommy Tuberville, R-Ala., framed the issue in blunt operational terms.

"Service members cannot maintain peak readiness if they cannot reliably access the medications they need," he said.

"We need to strike the right balance between controlling costs and ensuring access."

The bipartisan unease, and the unusual sight of senators from outside the subcommittee, including Sen. Angus King, I-Maine, showing up to question witnesses, signals that a fight over pharmacy contracting minutiae has become a live political issue heading into 2027, when the Pentagon begins shaping the next-generation TRICARE pharmacy contract.

A Contract Clause Warren Calls the "Biggest Smoking Gun"

Most of the public debate over TRICARE pharmacy access has centered on a familiar statistic. The roughly 13,000 to 15,000 independent pharmacies that have dropped out of the network since 2022.

But the sharpest moment of the hearing came when Warren produced something the DoD had refused to hand over voluntarily: the actual 2022 network participation contract that independent pharmacies were required to sign to keep filling TRICARE prescriptions.

Buried in it was a clause granting Express Scripts the right to what the contract calls "aggregate reimbursement reconciliation and offset methodology," legal language that, in plain terms, lets the company adjust what it pays a pharmacy after a prescription claim has already been processed and paid.

Greg Reybold, vice president of public policy for the American Pharmacy Cooperative, Inc. (APCI), didn't mince words about what that means in practice.

"In about 20 years of practicing law, that might be the biggest smoking gun document I've seen in a hearing," he told the subcommittee.

"What that means is they get to do post-adjudication offsets. So what they reimburse a pharmacy at the point of sale, they get to move it around... we are essentially talking about a complex shell game."

That clause matters because it echoes findings from a 2024 Office of Personnel Management inspector general audit, which found Express Scripts had overcharged the American Postal Workers Union Health Plan and the federal government by roughly $45 million through improper spread pricing — charging a payer more for a drug than it reimburses the dispensing pharmacy, and quietly pocketing the difference. Warren argued the contract language enabling that scheme elsewhere in the federal government is present in the TRICARE contract too.

"They have already been caught with their hand in the cookie jar on this," Warren said.

Adam Kautzner, president of Express Scripts and Evernorth Care Management, told the panel the company "does not engage in spread pricing" in the TRICARE contract.

Warren's response: without an independent audit, Congress has no way to verify that claim one way or the other, which is precisely the audit provision now written into the Senate's fiscal 2027 defense policy bill.

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What the DoD and Express Scripts Say

Dr. David J. Smith, a retired Navy rear admiral serving as deputy director of the Defense Health Agency, defended the model's basic architecture. He testified that Express Scripts is paid a fixed administrative fee for each prescription filled, which he said eliminates the profit mechanisms common in commercial PBM contracts.

"We are essentially the PBM," Smith told the committee, arguing DoD, not Express Scripts, controls drug pricing under the arrangement.

Smith also pointed to access metrics baked into the contract: 98% of TRICARE beneficiaries live within 15 minutes of a network retail pharmacy, exceeding contract minimums, and the network still includes roughly 46,000 participating pharmacies, 16,000 of them independents.

Kautzner noted the $14 mail-order and $16 retail copays beneficiaries pay go directly to the Defense Health Agency, not to Express Scripts, and that beneficiaries can fill prescriptions free of charge at military treatment facilities.

The Other Side of the Counter

That defense rang hollow to the independent pharmacists who say they lived with the consequences of the 2022 contract renegotiation. Dr. Lansford, owner of Roden-Smith Pharmacy in Clovis, New Mexico, testified that under the prior contract his pharmacy was already being reimbursed about $0.37 below cost per prescription, a loss of roughly $2,500 in 2022 on its own. The terms Express Scripts proposed for 2023 would have pushed that loss to nearly $9 per prescription, or roughly $60,000 a year at his pharmacy's volume.

"We were pushed out of the system by contract terms that made a difficult situation impossible," Lansford told the subcommittee.

He described what that means for real patients: a disabled Air Force retiree whose caregiver relied on Lansford to catch medication conflicts each month, and young active-duty spouses who lost the ability to swing through his drive-thru for a sick child's antibiotic and now wait in line at the base pharmacy hoping the drug is even in stock.

"No contractor should be allowed to referee a game while also competing in it," Lansford said. "Military families experience the consequences while the contractor reports that the system is working just fine."

Reybold made a related cost argument: filling generic prescriptions at retail pharmacies is often cheaper for both beneficiaries and the government than mail order, since a beneficiary pays the pharmacy's actual cost rather than the standard $16 retail copay, if that cost is lower. When 13,000-plus pharmacies left the network, he said,

"The only winner was the Express Scripts mail order pharmacy," because departing pharmacies' patients had nowhere else to go.

What's Next

The GAO audit provision is not yet law. It's part of the Senate Armed Services Committee's draft of the FY2027 NDAA, which still has to survive negotiations with the House and a floor vote.

Warren has also called on the DoD to "flatly prohibit vertical integration" in the next-generation TRICARE pharmacy contract now in early planning stages, meaning a future contractor could be barred from simultaneously running its own competing pharmacies. The Military Coalition, an umbrella group of veteran and military family advocacy organizations, has separately warned that pending changes to the pharmacy contract could reduce access for beneficiaries stationed overseas and complicate enrollment.

For now, the core dispute remains unresolved: DoD and Express Scripts maintain the current model protects taxpayers by removing the profit incentives that drive spread pricing elsewhere in the industry. Warren, Reybold, and Lansford argue the 2022 contract language proves otherwise, and that only an outside audit will settle it.

“The audit will reveal a lot of the steering, the spread and the price manipulation that [Express Scripts is] concealing right now,” said Lansford.

Whether that audit happens depends on the impending legislative negotiations. As lawmakers prepare to finalize the NDAA, military families and pharmacists will be watching closely.

Dr. Adam Kautzner, president of Express Scripts and Evernorth Care Management, did not respond to interview questions submitted for this story.