S-4106-119
Star Print ordered on the bill.
Sponsored by Tom Cotton (R-AR)
What it does
This bill would amend the TRICARE pharmacy benefits program in three ways. Starting October 1, 2026, it would allow eligible military beneficiaries to fill non-generic maintenance medications at any retail pharmacy of their choice, rather than being steered toward specific network options. It would set minimum reimbursement standards for retail pharmacies — requiring payment based on actual drug acquisition costs plus a dispensing fee matching the local Medicaid rate — and would ban pharmacy benefit managers (PBMs) from charging pharmacies hidden or retroactive fees. It would also require the Government Accountability Office (GAO) to conduct annual independent audits of PBM reimbursement practices and pharmacy network adequacy, with results reported to Congress.
Who benefits
Active-duty service members, military retirees, and their dependents enrolled in TRICARE — approximately 9.6 million beneficiaries — who would gain broader pharmacy access and choice. Independent and community retail pharmacies, particularly in rural and underserved areas, which would receive higher and more transparent reimbursement. Pharmacies currently subject to retroactive "clawback" fees from PBMs would benefit from the fee prohibition. Rural TRICARE beneficiaries with limited access to preferred network pharmacies would gain more convenient local options. Congress gains improved oversight through mandatory GAO audits.
Who is hurt
Pharmacy benefit managers (PBMs) administering the TRICARE contract would face reduced ability to steer beneficiaries toward preferred pharmacies and would lose revenue from fees currently charged to retail pharmacies. Mail-order and specialty pharmacies that currently benefit from mandatory maintenance medication channeling may see reduced volume. The Department of Defense could face higher program costs if broader retail access and higher reimbursement rates increase overall pharmacy spending. Taxpayers could indirectly bear any increase in TRICARE pharmacy program costs.
Supporters argue
Supporters argue that PBMs have used opaque fee structures and mandatory mail-order requirements to reduce payments to independent pharmacies — sometimes below the cost of acquiring the drug — forcing closures that leave TRICARE beneficiaries, especially in rural areas, without convenient access to care. They contend that tying dispensing fees to Medicaid rates establishes a transparent, market-tested benchmark, and that annual GAO audits will provide Congress with the independent data needed to hold contractors accountable. They point to documented PBM practices such as retroactive "DIR fees" in Medicare Part D as evidence that similar abuses occur in TRICARE.
Opponents argue
Opponents argue that mandatory minimum reimbursement rates and fee prohibitions remove the cost-management tools that PBMs use to negotiate lower drug prices on behalf of the program, potentially increasing overall TRICARE pharmacy spending and shifting costs to the Defense Department budget. They contend that mail-order and preferred-network pharmacy arrangements — which the bill would partially dismantle — have historically produced measurable savings through volume purchasing and adherence monitoring. They argue that setting dispensing fees by reference to Medicaid rates, which vary by state, introduces geographic inconsistency and may not reflect actual costs in all markets.
Constitutional context
This bill falls squarely within Congress's authority to raise and support armies and to appropriate funds under Article I, §8, cls. 12–14 and the Appropriations Clause (Art. I, §9, cl. 7). It modifies the terms of federal contracts and spending within an existing congressionally authorized program, raising no significant constitutional tension.
Checks and balances
Congress gains enhanced oversight authority through mandatory annual GAO audits reported to the Armed Services Committees; the Secretary of Defense retains implementation authority through contract conditions, and the Comptroller General serves as an independent check on PBM contractor conduct.
Historical precedent
The Medicare Part D program underwent similar PBM transparency and reimbursement changes under the Inflation Reduction Act of 2022 and subsequent CMS rulemaking, which eliminated retroactive direct and indirect remuneration (DIR) fees charged to pharmacies.