How to save money on prescription drugs

Practical tips to help you be a smarter health care consumer and reduce your family’s prescription drug costs.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

Key takeaways

  • Understand the details of your plan’s coverage.
  • Speak frankly with your doctors about cost.
  • Make your pharmacist a member of your team.

When it comes to the cost of prescription medications, the prognosis isn’t encouraging. Drug costs continue to climb: Total spending on prescriptions grew more than 16.8% in 2018 and is expected to do the same this year, according to a study by the Department of Health and Human Services.1 In fact, prescription drugs today account for the largest share of your health plan premium, edging out even physician services (see chart).

Why have costs risen so much? A shortage of raw materials, delays in generics manufactured outside the United States, and high demand for certain drugs all play a role, says Sharon Frazee, a spokesperson for the Pharmacy Benefit Management Institute (PBMI). The average cost to bring a new major drug to market now exceeds $2.5 billion and can take up to 10 years.2 People are also using more medications, with nearly half of the population taking at least one prescription medication in the past 30 days and nearly 11% taking five or more.3,4 High-priced “specialty meds,” while offering new hope for hard-to-treat illnesses, also come at a cost. In a recent survey by the National Business Group on Health, large employers cite the use of specialty drugs to treat such conditions as cancer and hepatitis C as a leading contributor to higher health costs.5

To manage these escalating costs, health plans and employers are looking for ways to negotiate lower rates, including tightening their lists of covered drugs (called formularies) and requiring patients to shoulder more of the cost through copayments and coinsurance.6 Many employers have moved toward high deductible plans, too, in which enrollees must pay the full cost of their non-preventive prescriptions until they meet a deductible that can range from $1,350 to $6,750 for an individual.7 Not surprisingly, 4 in 10 adults worry about being able to afford prescription drugs.8 If you are among that group, or you simply want to keep your drug costs down, here are some tips:

1.Understand the details of your plan’s coverage

Review and make sure you understand the basics of your plan, such as the amount of your deductible and what your co-pays or out-of-pocket expenses are for different benefits. Do you have to meet a deductible before your non-preventive drug coverage kicks in? Approximately half of all medical plans have a deductible of some kind, says Frazee. “For others, you pay a copayment or coinsurance right away,” she explains. (See last section.)

Next, ask about your plan’s formulary, or its list of covered drugs. “During open enrollment at the end of the year, check that your plan covers your current medications, and how much of their cost it covers,” says Lisa Gill, deputy content editor for Consumer Reports Best Buy Drugs.

Many plans group the medications they cover into price categories called tiers. Tier-one drugs are typically your plan’s preferred generics, and they require the lowest copayment or coinsurance. If your medication is in a higher tier, you’ll pay a much larger share (see graphic). “Pharmacy benefit managers have moved a lot of drugs to more-expensive tiers,” adds Gill. “So out-of-pocket spending has gone up, even if the drug price hasn’t.”

Another critical question: Does your plan have preferred pharmacies where you’ll be charged a smaller copayment? Last year, 36% of plans had a preferred network, according to the Pharmacy Benefit Management Institute (PMBI). Almost all plans offer a mail-order option that will allow you to fill your prescription for 90 days at a drastically reduced cost.9 “People throw away a lot of savings by not filling a 90-day supply,” says Frazee. “A 30-day regimen may cost $10, compared to $17 to $22 for a 90-day supply. Some insurers even offer free maintenance drugs if you get them through mail order.” And some preventive medicines are also free under the Affordable Care Act. For instance, bowel preparation medicine before a colonoscopy is covered for people age 50 to 74.10

Tip: Find out if your health plan offers an app to help you estimate the cost of filling a prescription. If it does, use your smartphone to access information quickly about your covered meds and their costs. For instance, United Healthcare has a Health4Me app that lets you enter your prescription and get its cost at a network pharmacy or through mail order even before you leave the doctor’s office.

Prescription drug tier Copayment for a 30-day supply at a retail pharmacy Copayment for a 90-day supply at a retail pharmacy Copayment for a 90-day mail order prescription
Tier 1 $10.58 $22.97 $21.54
Tier 2 $31.11 $70.67 $64.88
Tier 3 $54.23 $132.33 $114.05
Tier 4 $117.28 $285.28 $194.29
Source: Pharmacy Benefit Management Institute RESEARCH REPORT:Trends in Drug Benefit Design; 2016
 

2.Speak frankly with your doctors about cost

“When doctors prescribe a drug, they may choose from several options, but they don’t necessarily know which ones are covered in your plan or how much each option will cost,” explains Dr. Michael Rea, a pharmacist and CEO of Rx Savings Solutions, which helps employees of member companies reduce their drug costs. “Sometimes one drug is clearly best for you. Other times, there may be less expensive alternatives that work equally well.” Bring up cost with your doctor and check your company’s formulary together to determine the lowest-cost solution for you.

Generic drugs typically cost 80% to 85% less than brand-name drugs.11 Even among generics, drugs designed to treat the same condition may vary greatly in price. “The fastest-growing component of savings is from generic to generic,” says Rea. You may save money by moving from one generic to another, just as you would by moving from a brand-name drug to a generic.

In some instances you can save money and treat your condition equally well through the use of something called a pharmaceutical alternative. Unlike a generic, which has the same active ingredients as its brand-name counterpart, alternative medications use different active ingredients to treat the same condition.12

Alternative medications aren’t always an option, but when they are, they can provide big savings. Take the brand-name medication Crestor, which is used to treat high cholesterol. A 30-day supply of Crestor 5mg may cost around $222, according to Rx Savings Solutions. Substituting the generic Rosuvastatin 5mg could reduce the cost to $35.92 per month, but switching to a drug alternative such as Simvastatin 40 mg may cost as little as $1.12 per month—a savings of more than $2,500 a year.13 Be sure to talk to your doctor about what might work best for your particular situation.

Sometimes taking a low-cost drug before using a higher-cost one isn’t a matter of choice. In fact, 83% of insurers require so-called “step therapy” for at least 1 class of drugs, says Frazee. In step therapy, you and your doctor try lower-cost medications first, and move on to more expensive alternatives only if necessary. This strategy is especially common for medications that treat common conditions like diabetes and high cholesterol, says Frazee.

Tip: Read Viewpoints: How to talk to your doctor—and save money and research prescription drug costs and alternatives on Consumer Reports Best Buy Drugs™.

3.Make your pharmacist a member of your team

"Pharmacists can be some of your best advocates for making sure you get the best price,” says Gill. Instead of simply handing over your insurance card so the pharmacist can fill your prescription, take a few minutes to ask if there is a way you can save money. “Taking a few extra minutes to talk to your pharmacist could potentially save you thousands," says Frazee.

For instance, pharmacists can suggest such cost-reducing options as changing from a liquid to a capsule, taking 2 different prescriptions rather than 1 combination drug, or getting a higher-dose pill and splitting it. “In many cases, doctors don’t know if a medicine is scored and can be easily split,” says Dr. Heather Free, a pharmacist and spokesperson for the American Pharmacists Association.

Pharmacists also can help you determine if it would be better to use your insurance plan or pay cash. For a brand-name drug, your insurer’s negotiated price usually will be lower than you’d spend in cash, says Rea. Many pharmacies offer discount cards, too. However, you should be aware that when you use a discount card, your payment doesn’t count toward your deductible. If your family goes to the doctor a lot and tends to meet your annual deductible, a pharmacy discount card may not be a good option.

The app OneRx works with your insurance to help you determine how to get the best price. Take a photo of your insurance card, and OneRx will show estimated copayments based on your plan. The app also shows cash prices, which in some cases may be less than your copay.

Of course, getting the best price isn’t the only consideration when purchasing medications. “Once you find a pharmacy that gives you a good deal on your most expensive medication, move all of your medications to that pharmacy,” says Gill. The reason: If you take several medications, one pharmacy should oversee them to help prevent the possibility of harmful drug interactions.

While drug costs may continue to climb, you can save a bundle if you take the time to be a more careful consumer of health care, says Gill. Before filling a prescription, ask your doctor and your pharmacy if there are ways to keep your costs down. Keep tabs on your health plan benefits too, particularly during open enrollment. “People often assume that their plan will remain the same,” says Gill, “but covered benefits often change. If you don’t know the new details of your prescription drug coverage, you could end up spending a lot more in out-of-pocket expenses than you need to.” That’s money you could put in your pocket—or, better yet— in your retirement plan, where it could help you live a happier, healthier future.

Tip: When shopping at online pharmacies, use only US websites that have the blue and red “VIPPS” seal, recommends Consumer Reports. VIPPS, which stands for Verified Internet Pharmacy Practice Site, is awarded by the National Association of Boards of Pharmacy to online pharmacies that meet strict criteria, such as the use of specific practices related to quality assurance and customers’ right to privacy.14

Use tax-advantaged savings plans to help pay for your prescriptions

If your employer offers a health Flexible Spending Account (FSA), you can put aside up to $2,700 in 2019 in pretax dollars to pay for prescriptions, copayments, and other eligible medical expenses. This can even be applied to the cost of over-the-counter medicines if your doctor writes a prescription for the medicine.

The money you put in an FSA is deducted from your paycheck before Social Security, federal, state, and local taxes are applied. That means if you set aside $1,000 and you’re in the 33% tax bracket, you’d save $330 in federal taxes alone. FSAs generally don’t allow you to carry money from one year to the next, so take care not to elect more than you will need. That said, some plans offer either a carry-over feature, allowing you to roll over up to $500 in unused funds to the next year, or a grace period, giving you up to an additional two-and-a-half months to use up your FSA funds. Lastly, your employer may also offer a “limited purpose health FSA,” which lets you set aside money before it is taxed to pay for your vision and dental care expenses.

If you’re enrolled in a qualifying high-deductible health plan (HDHP) and meet other eligibility criteria, you can save up to $3,500 for individual HDHP coverage or $7,000 for family HDHP coverage this year in a health savings account, or HSA (with $1,000 in additional catch-up contributions for people who are 55 or older by the end of the calendar year). Similar to an FSA, your contributions are made pretax and any earnings in your HSA are tax-free. Withdrawals you make to pay for qualified medical expenses are never taxed, but if you withdraw money for a non-medical cost prior to age 65, you’ll owe income taxes plus a 20% penalty tax.

Tip: Read Viewpoints: 3 healthy habits for health savings accounts.

 

Next steps to consider

See how an advisor can help you grow and protect your wealth.

Use our Health and Medical Information Worksheet.

Learn strategies for after retirement.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.

Sign up for Fidelity Viewpoints®

Get a weekly email of our pros' current thinking about financial markets, investing strategies, and personal finance.