Why your “cheap” generic isn’t so cheap
Generics are supposed to be the cheap option. So why are so many people getting sticker shock at the pharmacy counter?
Why have prices gone up?
Nearly nine out of ten prescriptions Americans fill are generics, for everyday conditions like high blood pressure, high cholesterol, pain, diabetes and depression.
A number of things have pushed generic prices up. Some of it is ingredient supplies getting squeezed as more overseas markets compete for them. Mostly, though, it’s demand plus a hunger for bigger profits.
But for a lot of people, the bigger problem isn’t the price of the drug. It’s how their insurance plan makes them pay for it.
♦ In some ways, Obamacare played a part.
Before the Affordable Care Act (ACA), most plans covered most of the cost of generic prescriptions. You might pay a small copay of $5 or $10.
The ACA requires insurers to cover many more essential benefits, including prescriptions.
• In exchange for accepting everyone regardless of health condition, the ACA gave insurers a lot of leeway in how they design plans. Shifting more of the cost of prescriptions onto consumers is one unfortunate result. (Deductibles were rising before the ACA too, in plans of all kinds.)
To protect their bottom line, insurers ration medications more than they used to. Approved drug lists, called formularies, have gotten shorter. Prior authorization and step therapy (making you try a cheaper drug first) are now the norm.
♦ Medicare Advantage plans joined in when CMS allowed step therapy for drugs given in a doctor’s office starting in 2019. It was sold as a way to lower drug prices, but it does nothing to make drug companies lower their prices. Members can now be forced to try the least expensive medication first, even if their doctor believes it will be less effective for them.
Shifting more costs to the consumer
Tiered pricing has grown to the point that some plans are absurdly complicated. There are now multiple tiers even for generics, plus “preferred” network pharmacies versus regular network pharmacies.
♦ Many plans now have really high deductibles. That’s dangerous because insurers have quietly moved everyday expenses like prescriptions under the deductible.
The standard prescription copay is being replaced with a percentage coinsurance if you’re lucky. In many plans, though, the full cost goes toward the deductible.
• When the insurer doesn’t pick up any of the prescription cost until the deductible is met, consumers get hit with some really high drug bills, even for generics.
In the past, your insurer might have shown the list price of a generic, but you only paid a small copay. Insurance companies never actually pay list price. They work through pharmacy benefit managers (PBMs) who negotiate deals involving discounts and rebates.
• The average consumer has no one negotiating for them. We can only shop around for the best price or take our chances with online drugstores.
PBMs used to make even that harder. “Gag” clauses kept pharmacists from telling you when paying cash would be cheaper than using your insurance. President Trump signed two bills banning them in October 2018. Good, but it didn’t do much to lower what people actually pay. Always ask your pharmacist for the cash price anyway.
The cholesterol drug example
Take two popular cholesterol drugs, Lipitor and Crestor. Both have gone generic. Both should be much cheaper now. But not for everyone.
Some prescription plans list the generic versions as non-preferred, require prior authorization, and charge copays that rival brand-name drugs.
People whose plans push costs toward the deductible find these generics aren’t such a great deal when they get charged the full pharmacy price. That’s something the tens of millions of Americans without health insurance have known for a long time.
♦ Lipitor’s generic is atorvastatin and Crestor’s is rosuvastatin. Without insurance or a discount card, some pharmacies charge $35 or more for a month of atorvastatin and much more for rosuvastatin. Prices vary wildly from store to store.
► Don’t lose hope! With a discount card, many people can get the Crestor generic for under $20 at Walmart. Check out the article Prescription Discount Cards.
Want the bigger picture on drug prices? Read Why do prescriptions cost so much?
