For many consumers, the new year means higher prices for prescription drugs. That’s not necessarily because the prices of the drugs have gone up. It’s because a new year usually means the start of a new annual deductible to pay down.
Your deductible is one of numerous factors that go into how much you pay for prescription drugs. To get the cheapest possible price for prescription drugs you have to consider whether to take a brand-name or generic drug, whether to buy from a local pharmacy or online, and even whether to opt not to use your insurance coverage at all when you buy drugs.
About 70 percent of American adults use at least one prescription drug, compared to only 55 percent five years ago, according to the research organization CivicScience. And almost one-quarter of adults take four or more prescription drugs, CivicScience says.
Americans spent almost $380 billion on prescription drugs in 2021, the latest year that statistics are available, according to Statista, or about $1,432 per capita, the highest amount —by far — among developed countries. That amount was almost 8 percent higher than the previous year.
Governments in most countries impose strict controls over drug prices, but in the United States, market competition predominantly sets prices. Last year, President Biden signed the Inflation Reduction Act, which allows Medicare — the largest purchaser of prescription drugs in the country — to negotiate prices directly with drug makers for certain high-cost medicines. Because of its enormous bargaining power, Medicare is expected to demand — and get — lower prices, which are to take effect in 2026.
In another attempt to lower prescription drug costs, the Food and Drug Administration, acting under an executive order from the Biden administration, recently allowed the state of Florida to import inexpensive drugs from Canada for its Medicaid program. Eight other states have laws that would allow importation, but Massachusetts is not among them.
Today, you can buy your prescription drugs at a brick-and-mortar pharmacy, at an online pharmacy, by mail order, or with “coupon cards” obtained online and presented at a traditional pharmacy.
Here are some things to know when shopping for prescription drugs:
What are the basics?
There are two kinds of drugs: brand-name and generic. Pharmaceutical companies that develop new drugs introduce them with a capital-letter brand name, such as Ozempic, which treats diabetes but is also prescribed by some caregivers for weight loss. Drug companies usually hold a patent on the drugs they develop for as long as 20 years. The patent prevents competitors from selling the same ingredients under a different name, and it lets the developer recoup its investment.
What’s a generic drug?
When patents expire, drug companies are free to sell the exact same active ingredient as the brand-name drug as a generic. For example, atorvastatin, used to treat high cholesterol to lower the risk of stroke or heart attack, is the generic equivalent of the brand name Lipitor.
For consumers, generics come at a huge discount, costing about 85 percent less than the brand-name drugs they are based on, according to the Federal Drug Administration. If you are taking a brand-name drug, ask your prescribing caregiver whether there’s a generic available to save money.
Do insurers insist that their members use generics?
Insurers generally provide a huge incentive for generics by the way they structure their copay “tiers.” Under my plan, for example, a 30-day supply of a generic requires a $10 copay, while a brand-name drug requires as much as a $65 copay. That’s how insurers drive down the use of brand-name drugs when a generic is available.
Do all insurers include coverage of all prescription drugs?
The vast majority of employer-based plans do include a prescription drug component. (Medicare drug coverage, known as Part D, is optional and comes at an additional monthly cost.) But insurers don’t cover all drugs.
How do I know which drugs my insurer covers?
An insurer’s list of covered drugs is called its “formulary” or “preferred drug list,” which spells out which drugs they cover and on what tier (tier 1 drugs have the cheapest copays). Some insurers require prior authorization for some drugs, and some insurers require you to try cheaper drugs first before approving more expensive ones. My plan has three tiers: generics, preferred brand names, and nonpreferred brand names. For a 30-day supply, my copays are $10 for generics (tier 1), $30 for preferred band names (tier 2), and $65 for nonpreferred brand names (tier 3).
Is it cheaper to use a mail-order pharmacy?
Yes, it usually is because the copay may be lower. Under my plan, I can order generic prescription drugs for pickup at a pharmacy in supplies of 30, 60, or 90 days, at $10 per 30-day supply. Thus, my copay for a 90-supply is $30. If I opt for mail order, I can only get it in a 90-day supply. And my mail-order copay is $25, a saving of $5 compared to pickup for generics. The same is true for brand name drugs: a 90-day supply of a tier 3 drug costs $195, but the same supply by mail order is $165, a savings of $30.
Are there other considerations for mail-order drugs?
Some people love the convenience of home delivery of their prescription drugs. But others feel more secure having face-to-face contact with caregivers at a traditional pharmacy without having to rely on mail service for prescription drugs that may be of critical importance to their health.
Are there reasons not to use your insurance for prescription drugs?
Yes, especially for those who have high deductible plans, which are increasingly popular, especially among younger people. High-deductible health plans, known as HDHPs, have deductibles of $1,500 or higher for an individual and $3,000 for a family. High deductibles mean lower premiums which may make sense for those who are in good health with few medical needs.
How does it work without insurance?
You shop at an online pharmacy, such as Cost Plus Drugs, which says it sells generics strictly at the manufacturer’s price plus 15 percent (plus pharmacy labor and shipping). Cost Plus Drugs accepts only a limited number of insurance plans and does not sell brand-name prescriptions. You plug in the generic you want on its website, select strength in milligrams and count, and click to get a price. Last year, I paid $151.03 for a generic prescription I take daily, including my $100 deductible. I pick up my prescription at a local pharmacy every two months (it comes in a 60-day supply). Cost Plus Drugs offers the same for $92.40, which includes a $5 shipping cost per order of a 60-day supply.
Another big player among online pharmacies is Amazon, which takes insurance and offers free home delivery of prescriptions to Amazon Prime subscribers.
What are “coupon cards”?
I experimented with GoodRx. When I put in my prescription for a 60-day supply, up popped a list of half a dozen nearby pharmacies, and when I clicked on CVS at the top of the list, I got a coded “coupon” which priced my prescription at $189.78 for a one-year supply (compared to $151.03 under my insurance and $92.40 at Cost Plus Drugs).
I wish it were easier to navigate the prescription drug marketplace. My advice is to spend some time online researching and experimenting with the various options.