Mr. MURTHA. What was the percentage of doctors that stayed in? Admiral HAGEN. I have the complete data broken down by doctors, nurses, corpsmen and whatever.

[CLERK'S NOTE.-The Department was unable to provide a response in time to be printed in this hearing volume.]

General SLOAN. In the interest of brevity, I will just note that the Air Force's experience by and large mirrored the Army and the Navy in the United States. I had some firsthand experience having been in the United States European Command surge at the time and had overall responsibility for all medical care in the European theater.

We had some temporary shortages-days to weeks, not weeks to months. There were a couple of selected clinical services that were closed down for a little bit longer than that, but basically it was a very gratifying experience. The patients cooperated, as Admiral Hagen has said, and that eased our problem overseas to a significant degree. We couldn't have done it without the Reserves and the Guard.

DRUG COSTS

Mr. MILLER. I think this is very good for the record, because, as I say, that is what our military was thinking about, they were thinking of their families and it is good that you people are planning ahead and that we have enough of the active duty people to move in if we had another international problem. So I thank each of you. One other question that I had; Mr. Secretary, in your prepared statement you talk about managing medical supplies, the pharmacy program also, and you say last year's hearings produced evidence that CHAMPUS out-patient drug costs are rapidly escalating, raising serious concern as to what efforts DOD has initiated to bring those costs under control.

For fiscal year 1988, DOD reported the CHAMPUS out-patient drug cost totaled about $50 million. For fiscal year 1990, such costs totaled almost $74 million. Thus, it was showing a growth of almost 40 percent over this period, two years. I am wondering, when we are talking about drug costs, was the drug cost higher or were you using more prescription drugs, and is that why the higher amount is reflected?

Dr. MENDEZ. Sir, if I may for a moment divide that question into a couple of answers.

First of all, it is the local issue. Namely the re-look at formularies to see if common formularies can be used in overlapping catchment areas. In hospitals, the staff reviews their ability to use generic drugs in terms of decreasing costs; specific departments review the utilization of medications, making sure that the staff is familiar with the costs involved in one antibiotic versus another, always considering patient sensitivities. That type of thing goes on locally.

Outside of the local issue, we have issues of how we buy and how we manage stocks. We are teasing apart these issues with the three services: what happens at the depot, what are the buys, what is the storage, how much do we gain through electronic purchase what relationship would exist with a vendor if we did not carry large in

ventories, namely could our inventory be carried by the drug manufacturer rather than by us, and what would be the difference in cost.

We are addressing all of those issues in order to be able to look at the matter of decreasing our costs.

Mr. MILLER. But it hasn't really answered the question as far as the volume of out-patient drugs.

Dr. MENDEZ. Let me submit that to you. I was giving you generically what we are doing. I will submit that with specific volumes and specific analysis of numbers, if that is all right.

Mr. MILLER. I would appreciate that.

[The information follows:]

CHAMPUS drug costs have been increasing at a rate above that of combined CHAMPUS costs. There are several apparent reasons, some of which are difficult to quantify.

Prescription drug costs, as measured by the Consumer Price Index, have been increasing at an annual rate of from 8 percent to 10 percent since 1988, for a net increase through 1991 of 31.4 percent.

It also is probable that the mix of types of prescriptions on claims submitted to CHAMPUS tends to be the higher priced drugs because many beneficiaries do not bother to seek reimbursement for the occasional low-cost prescriptions obtained from civilian pharmacies.

The CHAMPUS eligible population also has had an increased dependency on civilian pharmacies for a variety of reasons. Early in the fiscal year 1988 to 1991 period, the Veterans Administration sharply cut back on its pharmacy services, causing the many retirees with dual VA-Military Health Services System eligibility to be dependent on Military Treatment Facility (MTF) pharmacies or civilian pharmacies under CHAMPUS. The impact of the VA change on MTFs in areas with VA pharmacies was especially noticeable, and many MTF pharmacies were not able to meet the demand. This contributed to increased drug claims under CHAMPUS, the degree of which is not measurable with precision.

During this period, the number of CHAMPUS drug claims generally increased at a higher rate than the increase in CHAMPUS drug costs. CHAMPUS drug claims and costs by fiscal year for the period, with the annual percentage changes from the prior year, are as follows:

As listed in the table, the number of claims more than doubled over this period, while costs increased 80.1 percent. The most dramatic increase was for dependents of active duty members for whom claims and costs increased 145 percent. In summary, at least 39 percent of the CHAMPUS drug cost increase was probably due to drug price inflation. The remainder is increased dependency on civilian pharmacies, resulting in more beneficiaries filing more drug claims under CHAMPUS. In the civilian sector, drug use per person also has been increasing over this period.

Mr. MILLER. We are interested in that in more ways than one, medical costs are rising not only in the military, but also for social security, medicare and medicaid and if we had prescription drugs across the front increase 50 percent in two years, I would think the individual physician's costs would increase maybe 100 percent, be

cause certainly you would be buying by volume which should hold down that price.

When talking about warehousing in your statement you were telling about some warehouses that are holding 36 to 95 days of inventory, whereas civilian hospitals have established stockless systems.

Dr. MENDEZ. Indeed that is the part that I talked about in terms of holding inventories. How able are we to maintain our readiness posture, because we have to have the ability to deploy, and at the same time hold down inventories. Getting into the matter of electronic commerce is part of the material that we are tearing apart now, together with all three services.

Mr. MILLER. Thank you.
Thank you, Mr. Chairman.
Mr. MURTHA. Mr. Sabo?

BLOOD TESTING FOR LEAD

Mr. SABO. Thank you Mr. Chairman. Welcome, Dr. Mendez and the Surgeons General, and in particular welcome to my fellow county native, Admiral Hagen. It is good to see you.

Dr. Mendez, let me start on a positive note. The Congress last year made some requirements on blood testing of children in the Armed Services, and the reports I get are that plans are well in place and that the program is moving forward, and I commend you for it and the other people involved with it. I think it is an important program and it appears to be moving in the right direction, so I say thank you.

Dr. MENDEZ. Thank you, sir.

Mr. SABO. As part of that program we appropriated a million dollars for DOD to use in coordination with HUD and EPA in coordinating efforts to find better clean-up efforts. I am just curiousanything happening with that coordination with HUD and EPA?

Dr. MENDEZ. It is happening particularly through the Assistant Secretary for Production and Logistics. We want the ability to collect the samples which we have talked about as a source of concern. We want to trigger ourselves any time the possibility of contamination occurs in the environment, to be able to respond at the clinic, and also vice versa.

If we get a finding at the clinic in which there is a high lead level, we want the ability to trigger an evaluation, and, if necessary, a clean up. We have been meeting with the staff of the Assistant Secretary of Defense for Production and Logistics and have initiated a Memorandum of Understanding with that office

Mr. SABC. Are you also meeting with HUD and EPA? Because that was the purpose of the million dollars.

Dr. MENDEZ. The others will be, yes, sir.

CRI MENTAL HEALTH COSTS

Mr. SABO. I am curious about what is happening in CRI with mental health services. I think I heard the Chairman refer to it. One of our problems in CHAMPUS has been the rapid escalation of mental health services. We have tried a variety of arbitrary limits.

Do you have any report or are the figures the chairman used accurate in terms of health care costs within CRI versus CHAMPUS?

Dr. MENDEZ. We have now in place two things, basically. We have new comprehensive mental health regulations including your congressional directions that allow us to take care of our patients and at the same time to cut down cost.

It is my understanding that CRI has been able to achieve costavoidance because of their implementation of utilization management for the delivery of mental health care.

Over the past year, for the system at large, we have implemented mental health quality assurance and utilization management measures. I think we have been able to cause significant decreases in the expenditures, and I think that that will be reflected in the slope of the curve of CHAMPUS costs in this year and the following year.

Mr. SABO. Could you give us costs for most recent years in CRI versus CHAMPUS?

Dr. MENDEZ. I will be happy to provide those.

[The information follows:]