Disclaimer: In case it’s not clear, I’m not a doctor and what you read below is not medical advice.
A coworker and I use the same prescription for our allergies. We have the same doctor, the same insurance, the same copays. So why was she paying $50/month for this prescription compared to the $20/month that’s been coming out of my pockets.
I’m sure it’s not because she wanted to throw money away, after all, she has two teenage sons who offer plenty of help when it comes to spending money. But there are two main reasons that I can come up with:
- Prescription Rebates and Discount Programs
- Habits and Convenience
Prescription Rebates and Discount Programs
These are basically incentive programs provided by brand name drug manufacturers to lower the cost of filling the prescription to the end user. These discount programs come in various shapes and sizes, but can add up to some real savings (that’s savings to the end user – there are other external costs that we’ll address, too).
Prescription Rebates can come in two forms. The most common that I’ve seen is as a mail-away rebate much like you’d find on another consumer product.
What seem to be less common are in-pharmacy rebates. This is a rebate that the pharmacy gets from the manufacturer for selling the product, and depending on the pharmacy if they get the rebate they may pass that savings on to you.
Copay cards are basically coupons that bring your prescription copay down to a specified amount. If you have a $30 copay coupon, and your copay is $50, your copay card saves you $20. But if your copay on that drug is already $30, then the copay card is worthless to you.
The thing is, these discounts aren’t always well known and unless you go looking for them you might never know. That’s how my coworker and I ended up paying such different prices for our allergy medicine.
It’s a medicine that has a $50 copay on our plan. But there’s a $20 in-pharmacy rebate on it that one local pharmacy (Target for us) passes on to the consumer. And then there’s a $10 mail away rebate that I can send away for. Now all of the sudden that $50/month prescription costs me $20/month.
Habits and Convenience
How do habits come into play? Well, we get into habits of going to the same grocery store, the same pharmacy, the same this and the same that. And over time, we may not realize how much these habits end up costing us. But we can replace these habits with better ones to help us along our financial journey.
Always using the same pharmacy. I get why people do this. Getting medicine is a very personal thing, and if you have questions you want to ask the pharmacist, it can be very important to go to a pharmacy you trust.
Call around and explore options. Whenever you get a new prescription (or a refill Rx for one you’ve been using a while), call a list of pharmacies and ask what the Rx will cost you. I recommend calling: Costco, Target, your mail-away prescription provider, Walgreens (or CVS or Duane Reed), Walmart, and local supermarkets. Prices should be consistent across chains, so don’t worry about calling EVERY one of the 19 Walgreens in your town.
Not looking for discounts and throwing away your pharmacy receipt.
Use google. Before you pick up your prescription, google “[medicine name] + rebate” or “[medicine name] + copay card”. You might be surprised at the discounts available at (or after) your point of purchase. And don’t forget to also save your receipt and file for your Flex reimbursement or HSA reimbursement if applicable.
The nice thing about these new good habits is that they don’t need to be repeated every month. Once your pharmacy has your copay card on file they’ll keep it until it expires. Heck, my pharmacy even printed out the application for a new copay card for me when they saw that my copay card was expiring. I’m so lazy that I stack up my mail-away rebates and send them off after I’ve accumulated five or six of them to save on postage and time.
Sometimes Convenience Wins And That’s Okay
When you’re sick and the doctor gives you a scrip for a medicine to get you well again, for heaven’s sake, don’t waste time calling every pharmacy on your list or googling for copay cards. Fill the scrip at the nearest pharmacy you know and trust and get to bed and don’t worry if you overpaid for that prescription. (Though do save the receipt to file for your Flex Dollars.) Resting is probably a lot more important than saving $1 on a z-pak.
A Note on Negative Externalities and Moral Hazards
Every time I use one of these discount programs, I am reminded of Chief TANSTAAFL (my high school economics teacher’s method of helping us remember There Ain’t No Such Thing As A Free Lunch). Medical services are odd in the US in that we often only see a fraction of the true costs and often have no idea what the true costs are.
For example, when I get the allergy medicine that comes with a $50 copay for $20, it feels like a 60% discount to ME. But my insurance company is still paying full freight. And since the costs of my health insurance are reflective of what the insurer pays out… then I will eventually bear the cost of this full-freighted price down the road.
A couple of years ago, the NYT had a great piece that talked about the moral hazard that copay cards and other discount programs represent when they are applied to brand name drugs with generic equivalents widely available. So far, I’ve never been faced with that particular moral hazard, but it is worth knowing and understanding some of the less transparent pricing forces in the health care/health insurance industries.
Are you getting the best deal possible on your prescriptions? What are some of the tactics that you use to get the best prescription prices?