To provide for participation of certain Medicare-eligible individuals in Department of Defense pharmacy programs.

Directs the Secretary of Defense to expand and make permanent a demonstration project which allows individuals eligible for medical care and services under the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) to obtain pharmaceuticals by mail in order to permit individuals who are entitled to hospital insurance benefits under part A of title XVIII (Medicare) of the Social Security Act and who are members or former members of the armed forces, dependents of certain former members, or dependents of members who died while on active duty for a period of more than 30 days to participate in the project. Requires the Secretary to modify each managed health care program which includes a managed care network of community retail pharmacies in order to supply pharmaceuticals to the above individuals.