- 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: According to the Centers for Medicare & Medicaid Services (CMS), retail drug spending is projected to grow from $335 billion in 2018 to $560 billion in 2028.*
If you are concerned about being able to afford prescription drugs, 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 copays or out-of-pocket expenses are for different benefits. Do you have to meet a deductible before your non-preventive drug coverage kicks in?
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, editor of the Best Buy program of Consumer Reports.
Many plans group the medications they cover into price categories called tiers. Tier 1 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. “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.”
Plans often have (in network/out-of-network) preferred and standard network pharmacies, which can impact the amount you pay for your prescription drugs. Review your plan documents for information regarding preferred and standard pharmacy relationships.
Make sure, too, that you're taking advantage of any government benefits for which you're eligible. For example, if you meet certain income and resource limits, you may qualify for Extra Help: a program that helps pay for your Medicare drug coverage, plan premiums, deductibles, and costs when you fill your prescriptions.
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.
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 plan’s formulary together to determine the lowest-cost solution for you.
Generic drugs typically cost much less than brand-name drugs. 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. 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 Sharon Frazee, a spokesperson for the MJH Life Sciences and Pharmacy Benefit Management Institute. 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.
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.
Apps such as SingleCare, GoodRx, or WeRx work with your insurance to help you determine how to get the best price and show estimated copayments based on your plan.
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.
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 $2,850 in 2022 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 your total taxes are 33%, 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 $570 in 2022 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.
As a temporary measure for pandemic relief, for plan years 2020-2021, updates rules allow employers to offer special pandemic rules designed to allow the employees to spend accumulated FSA funds. The rules, which are voluntary to the employer, extend the grace period up to 12 months and the maximum carry over amount. Check with your employer's benefit department for your specific plan rules.
Similar to an FSA, your contributions are made pre-tax and any earnings in your HSA are tax-free. Unlike an FSA, however, contributions made to a HSA remain in the account until used (that is, they are not "use it or lose it") and they are portable and potentially investible, meaning the funds stay with you even if you change employers or leave the workforce. Withdrawals from your HSA that you make 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: Three healthy habits for health savings accounts.
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