DRAFT RFP Section H

SECTION H

H.1. RETAIL NETWORK COST CONTROL INCENTIVE (CLINS _________)

H.1.1. The following table, Retail Network Reimbursement Table H-I, contains the "Guaranteed Average Price Adjustment Percentage" and "Guaranteed Average Dispensing Fee" guaranteed by the Contractor and accepted by the Government for prescriptions for brand, generic, and specialty drug categories for each respective option period.

Retail Network Reimbursement Table H-1

For Use in Determining Incentives

Adjustment Percentage Guaranteed Average

Dispensing Fee

Note for Retail Network Reimbursement Table H-1

1. Each applicable "Guaranteed Average Price Adjustment Percentage" and "Guaranteed Average

Dispensing Fee" in this table will be used to calculate incentives as described in Section H.1.2.

Subject to paragraph H.1.3. below, the Contractor may earn an incentive fee if the total actual retail network reimbursement cost in a contract option period is less than the "Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs" that would have resulted from applying the Guaranteed Average Price Adjustment Percentage and the Guaranteed Average Dispensing Fee per prescription to the prescriptions filled in the retail network during the contract option period. The Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs will be calculated by first applying the Wholesale Average Price (WAC) price published by First DataBank (FDB) that is in effect at the time the prescription transaction is processed to completion and accepted by TEDS, then adjusting the WAC price by applying the applicable "Guaranteed Average Price Adjustment Percentage" at table H-1, and finally, adding the applicable "Guaranteed Average Dispensing Fee" specified in Table H-1 for each retail network prescription processed during the period. Prescriptions for which no WAC price published by First DataBank (FDB) is available at the time the prescription transaction is processed to completion and accepted by TEDS will be calculated using the discount specified in Table H-1 off of Acquisition Wholesale Price (AWP) rates published by Medispan.

The incentive will equal 10% of the difference between the total actual retail network reimbursement cost reported in TEDS and the Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs. For example, if in any option period the Contractor's Guaranteed Average Price Adjustment Percentage and the Guaranteed Average Dispensing Fee per prescription result in a Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs of $5 billion, and the actual cost to the Government was $4.95 billion, the Contractor would be eligible for an incentive fee of $5 million (10% of the savings of$50 million) for that option period. The amount of the incentive that the Contractor may earn is not limited.

H.1.2. The Government will assess a negative incentive if the total actual retail network reimbursement cost in a contract option period exceeds the Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs that would have resulted from applying the Guaranteed Average Price Adjustment Percentage and the Guaranteed Average Dispensing Fee per prescription to the prescription transaction processed to completion during the contract option period. The difference between the actual costs and the Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs will be a negative incentive assessed for the option period.

For example, if in any option period the Contractor's Guaranteed Average Price Adjustment Percentage and the Guaranteed Average Dispensing Fee per prescription result in a Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs of $5 billion, and the actual cost to the Government was $5.01 billion, the Contractor would be assessed a negative incentive amount of $10 million.

H.1.3. To earn the incentive fee referenced in paragraph H.1.1 above, the Contractor must meet or exceed all retail network access standards during a minimum of eleven months in each option period. Veterans Affairs, Public Health Service, and Indian Health Service pharmacies will not be included in the retail network access calculations.

H.1.4. Coordination of benefits claims, DVA claims, Medicaid claims, Public Health Service claims, Indian Health Service claims, non-network claims, vaccines administered by retail network pharmacies, and prescriptions for supplies and compounded medications will not be included in the calculation for the incentive fee or negative incentive assessment.

H.1.5. The Government's Pharmacy Data Transaction Service (PDTS) will accumulate reimbursement data from all retail network pharmacy transactions. PDTS will be the sole data source for calculating the total actual retail network reimbursement cost, calculating the Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs, and calculating the amounts of any incentive fee or any negative incentive assessment. The Government will measure and calculate the incentive amount after each option period and will notify the Contractor of the results. If the Contractor earns an incentive fee, the Contracting Officer will provide invoice and payment instructions upon verification sufficient funding is obligated on the Retail Network Cost Control Incentive line item in Section B. If a negative incentive is assessed, the Contractor shall follow the instructions of the Contracting Officer within 30 days.

H.2. ADDITIONAL FINANCIAL INCENTIVES

H.2.1. INCENTIVE FOR SAVINGS ON HIGH COST MEDICATIONS (CLINS ________)

For high cost medications designated by the Government for the purpose of this incentive, the Contractor will receive an incentive fee equal to 10% of the cost savings achieved when the Contractor influences and facilitates or otherwise initiates action that results in a beneficiary’s transfer of their prescription from a retail network pharmacy to the mail order pharmacy. To be eligible for this incentive, the Contractor must demonstrate that a retail prescription was filled within the past 120 days and document how the Contractor assisted the beneficiary in moving the medication to the mail order pharmacy. Qualifying initiatives and methods of assistance in moving prescriptions to mail order will be solely determined by the Government based on the level the Contractor demonstrates it influenced the transfer to mail order. The amount of the incentive will be based on the actual ingredient cost of the medication for the most recent claim processed for that beneficiary at the retail network pharmacy and the ingredient cost of the medication for the first mail order fulfilled for that beneficiary at the mail pharmacy. The cost per 1 day supply at each point of service will then be determined and the incentive amount calculated by the Contractor based on the day supply dispensed at the mail pharmacy.

For example, if the retail fill has an ingredient cost of $1,200 for a 30 day supply, the daily cost of the medication would be $1200/30 = $40. If the medication was dispensed at mail with an ingredient cost of $2000 for a 90 supply, the daily cost at retail would be used to calculate the cost of the same 90-day supply at retail, $40 x 90 = $3600. The cost savings for the medication at mail would be $3600-$2000 = $1600The Contractor’s incentive fee would equal 1600 x 10% = $160. The Contractor will earn an incentive fee one time based on the savings between the most recent prescription filled at retail and the first fill at mail order. The Contractor will not receive an incentive fee for subsequent refills at mail order for the same prescription and beneficiary.

The Contractor is not eligible to receive the standard mail transfer incentive fee described under H.2.2 for medications designated as a high cost medication for the purpose of this incentive.

The list of high cost medications, for the purpose of this incentive, is expected to change from time to time at the discretion of the Government. The retail ingredient cost of the medication will be as submitted by the retail pharmacy. The mail order ingredient cost to the Government is based on the Managed Care Pricing File. All calculations will be based on the Contractor’s claims data to PDTS. The Contractor shall submit the Contractor’s calculation of the incentive amount with supporting data, and its documented demonstration of the Contractor’s actions resulting in transfers from retail to mail order four times per option period for the preceding three months. Based on the Contractor’s submittal, the Government may verify ingredient costs and make the final determination of the incentive fee amount earned by the Contractor considering the Contractor’s documentation. The incentive fee amount is final upon notification by the Contracting Officer. The Contracting Officer will provide invoice and payment instructions upon verification sufficient funding is obligated on the applicable High Cost Medication Incentive line item. The Government‘s assessment of the Contractor’s submittal will be shared with the Contractor upon request. The Government reserves the right to review, audit, or validate the Contractor’s system, written processes, and adherence to those processes at any time in order to validate or determine the acceptability of the Contractor’s measurement and calculations.

H.2.2. Incentive for Transfers to Mail Order or MTF Pharmacies (CLINS ______) Separate from the transaction service for transferring retail prescriptions to mail order or MTF pharmacies specified in C.7.6, the Contractor will receive an incentive fee for identifying new prescriptions which are successfully transferred from a retail pharmacy to the mail order pharmacy, or the beneficiary’s designated MTF Pharmacy. The Contractor shall receive this incentive fee one time per beneficiary/drug. The Contractor must have a record of the prescription being filled at retail within the prior 60 days, and must have contacted the provider to obtain a new prescription to be eligible for the incentive fee. Upon request, the Contractor shall provide documentation to the Government that both of these criteria have been met. Also, the transfer shall be completed within 21 calendar days from beneficiary authorization to be eligible for the incentive fee.

This incentive shall be assessed subsequent to each contract quarter based on the Contractor’s report and verifying the eligibility requirements for an incentive fee have been achieved. The Contracting Officer will provide invoice and payment instructions upon verification sufficient funding is obligated on the applicable Retail Prescription Transfer line item in Section B.

H.3. PERFORMANCE GUARANTEES

The performance guarantees described in this Section is the Contractor’s guarantee that the Contractor’s performance will not be less than the performance standards described below. Each standard is guaranteed, measured, and assessed separately from contract standards specified in Section C and the referenced TRICARE Manuals. The rights of the Government and remedies described in the Performance Guarantee Section are in addition to all other rights and remedies of the Government. The Government further reserves the rights and remedies set forth in the Inspection of Services clause (FAR 52.246-4, 52.246-5) and the Default clause (FAR 52.249-8, 52.249-6).

H.3.1. For each occurrence the Contractor fails to meet each guaranteed standard, the Government will withhold from the Contractor the amount listed in the schedule below. Performance guarantee withholds will continue until the Contractor's performance improves to meet or exceed the standard. Performance will be measured as specified below. The Contractor will be notified of withholds accumulated and assessed subsequent to each contract quarter. For the purposes of this Section H.3, the term "performance standard" is defined as the standard specified in this Section H.3.

If it is determined that the performance standard was not met, then the performance guarantee withhold will be applied against the actual level of performance. Each standard will be guaranteed, measured, and assessed the applicable withhold determined separately, and in addition to, other standards.

For administrative purposes, the Contractor will be notified of performance guarantee withholds on a quarterly basis via a unilateral modification in accordance with FAR 43.103(b)(3) with this section as the cited authority for the modification. Unless arrangements are made otherwise, withholds will be made from the next available contract payment under any line item at discretion of the Government. Total Performance Guarantees assessed under H.3.2 through H.3.8 for any Option Period shall not exceed $2,000,000.

H.3.2. Mail Order Pharmacy Prescription Processing Standard: 100% of mail order prescriptions shall be shipped, returned, or denied within an average of 5 days from receipt, reported monthly.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.3. System Availability Standard: The Contractor’s system shall be available 99.5% of the net operating time. Net operating time is defined as TBD.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.4. DMR Claims Processing

Standard: 95% of DMR claims shall be processed to completion with 14 calendar days of receipt.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.5. Clinical Review Processing Standard: 95% of all clinical reviews shall be completed and notification sent to the beneficiary within 5 calendar days of receipt of a properly completed request, measured monthly.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.6. Telephone Service

Standard: Measured on a monthly basis, all Beneficiary Services calls received shall be transferred to a Beneficiary Service Representative with an Average Speed of Answer (ASA) of not more than 30 seconds after the caller has selected the option to speak to a BSR.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.7. Correspondence Processing

Standard: Measured on a monthly basis, not less than 95% of priority correspondence will be processed to competition within 10 calendar days. Priority correspondence is defined in TOM Chapter 23, Section 4, paragraph 1.1.

Withhold: $100,000 each full calendar month the standard is not met.

Measurement: Calendar month. Contractor report.

H.3.8. TED Edit Accuracy (TOM Chapter 1)

Standard: Measured on a monthly basis, the accuracy rate for TED edits shall be not less than 95 % after six months of performance during the first option period and 99 % after nine months and thereafter during the entire term of the contract.

Withhold: If the Contractor fails to meet the standard and falls below the standard, a performance guarantee amount of $1.00 for each TED record not meeting the standard will be withheld. For example, if only 93.3% of all TEDs pass edits for each of months seven, eight, and nine, then a performance guarantee amount will be applied to 1.7% of all TEDs submitted during the period (1.7% equals the difference between the Contractor's actual performance and the standard in this example). If 1.7% equates to 153,000 TED records, the performance guarantee withhold amount will be $153,000.00 (i.e., 153,000 X times $1.00).

Method: The number of TEDs failing to meet the standard will be determined each calendar month by the Government based on the TMA TED database.

H.4. REQUIREMENTS FOR MINIMUM LEVEL OF ENHANCED SAFEGUARDING FOR UNCLASSIFIED DOD INFORMATION

H.4.1. The Contractor shall implement and maintain information security in its project, enterprise, or company-wide unclassified information technology system(s) in accordance with the requirements set forth in DOD Directive-Type Memorandum (DTM) 08-027, Security of Unclassified DoD Information on Non-DoD Information Systems, July 31, 2009 (incorporating Change 2, September 02, 2011). The Contractor shall, at a minimum, comply with the specified National Institute of Standards and Technology (NIST) Special Publication (SP) 800–53 security controls. If a control is not implemented, the Contractor shall prepare a written determination that explains how either the required security control is not applicable or how an alternative control or protective measure is used to achieve equivalent protection.

H.4.2. In connection with the Enhanced Safeguarding requirements, the Contractor shall annually provide the completed checklist and certification described in Section F, Checklist and Certification for Minimum Level of Enhanced Safeguarding for Unclassified DoD Information, and CDRL A , Checklist and Certification for Minimum Level of Enhanced Safeguarding for Unclassified DoD Information. The Contractor shall use a current, dated copy of the prescribed Checklist and Certification Form, to be provided to the Contractor by the Contracting Officer’s Representative (COR) no later than 30 days prior to the date on which the completed and signed form must be submitted to the Government.

H.5. Covered DoD Officials

The Contractor is hereby notified that an actual or potential conflict of interest may exist with Covered DoD officials, as defined by DFARS 252.203-7000. In addition to the requirements of DFARS 252.203-7000, the Contractor must get approval from the Contracting Officer prior to the involvement of the covered DoD official in the performance of this contract or render the approval of a mitigation plan. Failure by the Contractor to comply may subject the Contractor to rescission of this contract, suspension, or debarment in accordance with 41 U.S.C. 423(e)(3).

H.6. Post Award Organizational Conflicts of Interest

The Contractor agrees that if an actual or potential organizational conflict of interest is discovered after the award of this contract and at any time during performance of the contract, the Contractor will immediately notify the Contracting Officer, in writing, of the nature of the actual or potential conflict. The Contractor shall submit a plan of action to the Contracting Officer within 30 days of notification, outlining the actions the Contractor has taken or proposes to take to avoid, neutralize, or mitigate the actual or potential organizational conflict of interest. The Government reserves the right, in case of a breach, misrepresentation or nondisclosure, to terminate this contract, disqualify the Contractor from subsequent related contractual efforts, or pursue any remedy permitted by law or this contract. Notwithstanding the above, the Contractor has the final responsibility to avoid, neutralize, or mitigate actual or potential conflict of interests during the performance of the contract.

H.7. Impaired Objectivity The Contractor is responsible to prevent, avoid, or mitigate any situation where the Contractor may have potential performance conflicts of interests due to Contractor financial interests, multiple internal allegiance or impaired objectivity where the best interests of the Government could be compromised. This includes, but is not limited to, the Contractor’s role as a fiscal intermediary and in its role in pursuing waste, fraud and abuse (TOM Chapter 13) involving retail pharmacies in which the Contractor has a financial interest, TRICARE beneficiaries employed by the Contractor, or prescribers. If situations that had not previously been addressed before award of the contract change or emerge after the award of this contract, and at any time during performance of the contract, the Contractor will immediately notify the Contracting Officer, in writing, of the nature of the actual or potential performance conflict. The Contractor shall submit a plan of action to the Contracting Officer within 30 days of notification, outlining the actions the Contractor has taken or proposes to take to avoid, neutralize, or mitigate the actual or potential performance conflicts of interest. Notwithstanding the above, the Contractor has the final responsibility to avoid, neutralize, or mitigate actual or potential performance conflicts during the life of the contract.