Why Are Some Medicare Part D Prescription Drugs More Expensive?
If you have Medicare Part D (prescription drug coverage), you may have noticed that medication costs can vary widely. Here’s what to keep in mind as you manage your Medicare Part D costs.
What drives prescription drug costs under Medicare Part D?
What’s a major factor affecting your Medicare Part D costs? It’s whether your Medicare prescription drug coverage includes your medications in its formulary. A formulary is simply a list of prescription medications covered by a Medicare prescription drug plan. You can easily look up this information by calling your Medicare plan; many plans include this information online as well.
Formularies often put covered medications into “tiers” to determine copayment and coinsurance costs. Prescription drugs on lower tiers have lower copayment and coinsurance costs, while those on higher tiers have higher out-of-pocket costs. For example, a plan that includes Medicare Part D benefits may use the following cost structure:
- Tier 1: Preferred generic drugs
- Tier 2: Preferred brand-name medications
- Tier 3: Non-preferred brand-name and generic medications
- Tier 4: Specialty (see below)
Medicare Part D specialty prescription drugs
If you have a health condition that requires a “specialty-tier” prescription drug, your Medicare Part D costs may be considerably higher. Medicare defines a specialty prescription drug as a medication that costs more than $670 a month as of 2019. Medicare prescription drug plans place specialty drugs on the highest tier. That means they have the most expensive copayment and coinsurance costs.
According to the Pharmaceutical Care Management Association, specialty-tier medications usually treat chronic, rare, or life-threatening conditions, such as cancer. These medications tend to be much more expensive, likely because the cost to research and develop them is higher. In fact, according to a report by the Medicare Payment Advisory Commission, spending on specialty prescription drugs makes up 20% of total Medicare Part D spending.
Taking even just one specialty-tier medication could significantly impact your Medicare Part D costs. For example, say you’re taking a Medicare Part D medication that costs $80,000 annually. Even with a 5% coinsurance, you’d still owe over $300 each month for that single prescription.
Other factors that affect Medicare Part D costs
Other factors could affect your Medicare Part D costs, including:
- Network pharmacies: if you use your plan’s in-network pharmacies (if applicable), your Medicare Part D costs could be lower.
- Mail-order programs: plans may offer discounts if you participate in programs that mail your medications to your home.
- Cost differences between plans: Medicare Part D costs vary from plan to plan, even for coverage of the same medications.
- Coverage gap: your Medicare Part D costs may be temporarily higher if you enter the coverage gap (see below).
Please note that you’ll pay the full cost for covered Medicare Part D medications until you’ve reached your plan’s deductible. You may also temporarily pay more for Medicare Part D generic medications if you enter the Medicare Part D coverage gap (although this gap will be closed by 2020). In 2019, if you’ve spent $5,100 on Medicare Part D out-of-pocket costs, you’d be out of the coverage gap and get catastrophic coverage, where you pay a reduced coinsurance or copayment for the rest of the year
Even if your yearly out-of-pocket costs bring you into the catastrophic coverage stage, you’ll still owe a small copayment or coinsurance. This could be significant if you’re taking a specialty-tier prescription drug because even a reduced coinsurance for an expensive medication could wind up being hundreds of dollars a month.
All of these factors make it all the more important to shop and compare Medicare Part D coverage options in your area. If you’d like to browse Medicare Part D prescription coverage choices, it’s simple to get started. Just enter your zip code into the census tool to view plan options in your area. You can even enter in your prescription drugs to find plans that cover your medications.