A federal appeals court has upheld a decision requiring pharmaceutical manufacturers to refund the Department of Defense for higher prescription costs at retail pharmacies.

Twenty years ago, the federal government established a 24% discount on the retail price of most prescription drugs available to military personnel through the Pentagon’s Tricare healthcare program.

The cap applied to medicines that the Defense Department purchased directly and distributed to service members at military treatment facilities or through Tricare’s mail-order program. But it didn’t apply to prescriptions that service members bought at retail pharmacies within the Tricare network, such as a CVS or Walgreens.

This resulted in the Pentagon paying the full retail cost at this point of service. In 2006 alone, the cost was $3.9 billion for the agency.

To rectify this situation, Congress in 2008 passed legislation that made the price cap standard at all three points of Tricare service. But drug makers objected to this change, and sued the government in federal court.

Their lawsuit failed, first before a district court judge, and then before the District of Columbia’s Court of Appeals, which upheld the lower court ruling that said the companies must refund the Defense Department at a cost estimated to be $500 million.

-Noel Brinkerhoff

To Learn More:

Big Pharma Loses Protest to New Price Ceiling (by Dan McCue, Courthouse News Service)

Coalition For Common Sense in Government Procurement v. United States (U.S. Court of Appeals, District of Columbia) (pdf)