Are You Overpaying For Prescriptions?

Disclaimer: In case it’s not clear, I’m not a doctor and what you read below is not medical advice.

20130606-191255.jpg

TS Andrea broke these off, so I hope they last in the vase!

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

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

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.

Bad Habit

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.

Good Habit

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.

Bad Habit

Not looking for discounts and throwing away your pharmacy receipt.

Good Habit

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?

33 comments to Are You Overpaying For Prescriptions?

  • It definitely pays to shop around. I take prilosec daily for acid reflux, and a few years back my insurance company jacked my co-pay up to $50. I looked online and at a few different pharmacies, and finally found that I could get the same amount of the generic equivalent at Costco for like $15. That’s a huge savings on a medicine that I take daily.
    Matt Becker recently posted..Lessons Learned From a Flat TireMy Profile

    • That is a big savings. I have heard good things about Costco’s pharmacy prices, but so far for what I use they are no better than places closer to our house.

  • So, did you share your secret with your co-worker?

  • I can say I fall into just always saying call it in to my regular place. I never think to even look to see if someplace has it cheaper. I need to get better at this. the convenience has been a major part of it as the pharmacy is less then 2 mins away.
    Your Daily Finance recently posted..Personal Finances for Everyone – Even YOU!My Profile

  • Back in October, I paid $83 for a three month supply of my prescription. The price seemed high, but this was my first time taking this medication and I was a bit nervous about the whole thing, so I never questioned the cost…I just figured that was how much this prescription cost. I later realized that the pharmacy didn’t have my updated insurance on hand, so I was charged for the prescription as if I didn’t have insurance coverage. Turns out that there is no co-pay at all for my prescription, thanks to the ACA. That was $83 down the drain…I felt like an idiot!
    JW_Umbrella Treasury recently posted..Finding a Bargain Apartment in a High-Rent AreaMy Profile

    • Ooh, that’s painful. Will your insurance cover it retroactively? One of my Rx is supposed to be Copay free starting this month for ACA, and I’ve been told if it doesn’t go through correctly, to pay it and they will reimburse me after the fact.

  • I honestly never thought about getting coupons for medication. I’ve always just paid what the Target pharmacist told me to. It’s certainly worth at least Googling to see whether or not discounts are available.
    For a while I was on a medication that cost my insurance company something like $10,000 a pop and all I had to pay was $100. There can certainly be some strange incentives when other people are paying for your stuff…
    CashRebel recently posted..My Commuting Survival GearMy Profile

  • Your insurance company may not be paying full freight. Different insurance companies bargain with different drug companies for discounts. That means they have different “formularies”. So if your insurance company has 3 tiers of copay, one for things outside the formulary, one for things on the formulary, and one for generics, that’s why– the insurance company is using their bargaining power to get lower prices on some things but not others. And when they change their formulary, it can be a big pain because you may end up paying more or switching to a different medication for the same thing.
    nicoleandmaggie recently posted..Ask the grumpies: econ book recommendations for a gifted 9 year oldMy Profile

    • You’re right, the insurance company would be bargaining for bulk pricing. My plan has 3 tiers and what I’ve been hit by with twice is when a brand name med goes off patent, but the generic is unavailable due to patent litigation. For us, this shoots the brand name med to the most expensive tier, but the generic is unavailable so you get stuck…

  • Ivy

    Very timely article for me
    I have even higher stakes here. Our own insurance is good, with low copays and it’s not worth the hassle to apply those strategies. However, for 3 years now I have been buying a specific medication for my father who lives abroad and it’s not available there (long story short the Rx company had to change suppliers and until they get the new one qualified they just stopped supplying the small markets, and the Gx alternative was not approved for Europe). The situation is not yet resolved and it’s a life-saving medication, I mean people actually died because they couldn’t get it and the alternatives were not right for them.
    My father doesn’t live here but he had a prescription which a doctor friend kindly calls in for us once a year to our local CVS. The price was quite steep – $120 monthly for generic and when it’s not in stock $200 for branded. I was paying it without looking for alternatives first because I was not aware they exist as you say above, and second because I didn’t want to further inconvenience the doctor. However, last 5 months the CVS was out of it as well, causing me no end of worry, when they finally received it last week, I snatched a year-worth of supply for over $1500. The sheer amount made me consider that maybe I should look around both for price and for contingency options if they run out again. So I had a friend who shops at Costco check with their pharmacy, and guess what, they did have it, and it was almost half the CVS price!
    An [expensive] lesson learned. Next time we’ll do Costco (and I’ll check in Target meanwhile as well)

    • Definitely an expensive lesson, but glad you know for next year.

      I’m sure your dad really appreciates it, though. That’s a heck of Happy Father’s Day gift. =)

  • Anne

    I’m very lucky that my insurance covers 100% of the only prescription I take regularly. It’s generic and costs like $38 without insurance (I’d check out costco prices if I ever had to for that) and my insurance gets it for like $26. When I need antibiotics and things I’ve found the generics to be a low co-pay, approx $10, but I know my coworkers on brand name scripts pay a pretty penny for them.

  • Great tips you gave – I hope your coworker learned your method because that’s quite the pricey difference. Another surprising thing I learned one time is that some pharm stores have Triple A discounts – I don’t remember the circumstance, but my insurance was having issues and the pharmacist, seeing the worried look I had for having to pay retail, asked if I had a Triple A card. I did, and it ended up being even cheaper than my prescription co-pay!
    anna recently posted..Why I began runningMy Profile

    • I told her, but I’m not sure if she changed her habits. I didn’t want to be a pest about it, but I hope she did.

      I had never heard of AAA discounts – that’s pretty awesome!

      • Amy K

        We used AAA to get a discount on our cat’s prescriptions, once his heart problems got bad enough to medicate. It’s not a huge discount, but it helped!

      • Amy K

        For what it’s worth, Walgreens also gave us a discount for buying a full bottle of the medication. I think we had the veterinarian write the prescription for a full year so we’d get the discount; we knew it was maintenance medication he’d be on for the rest of his life. Which was unfortunately short due to the heart problem. Walgreens also took back the entire still sealed bottle, which they will not do with the orange dispensed-by-pharmacy bottles. That was manager’s discretion and they may not always do it, but it was greatly appreciated because a full year’s supply even after AAA discount was quite a bit of money.

  • CincyCat

    OMG! I just did a quick internet search for one of my most expensive name-brand Rx, and they do indeed have a co-pay card! I about fell out of my chair when I saw that it would reduce a prescription that normally costs me in the neighborhood of $80-90 for one-month supply down to only $10 (ten dollars)!! The only stiplulation is that you cannot get your Rx thru a government-funded program (medicaid, etc), and you cannot have your Rx already reimbursed in full from another insurer/source. If my current pharmacy does not honor the co-pay card, you’d better believe I will be shopping around! Thank you, thank you, thank you for posting this!!

  • Tara

    FSA all the way! For people who know they’ll have the same prescriptions every month, even just doing the minimum FSA account each year will save you some money on your taxes. My current job doesn’t offer an FSA but I totally took advantage of it for my monthly prescriptions and copays with my last job.

  • While we don’t pay for prescriptions at the moment unless we are acutely ill, I will return to this if we get on a regular medication to make sure we are paying the minimum out of pocket! Thanks for this post.
    Emily @ evolvingPF recently posted..May 2013 Month in Review: MoneyMy Profile

  • My insurance plan will change July 1st to a high deductible plan. I’ve been doing the math and I think I’ll probably break even, but we’ll see. Right now we have prescription co-pays, but with the high deductible plan, medications aren’t covered so we’ll be paying out of pocket. Right now I only take birth control and that’s now free thanks to Obama care. If I do end up having to take anything I’m certainly going to shop around and figure out the cheapest option. I didn’t realize until a few years back that pharmacies charge different prices, I thought they were standard across the industry, wrong. So wrong!
    KK @ Student Debt Survivor recently posted..Priceless Skills I Learned at The Job I HatedMy Profile

  • Our prescriptions are covered by my employer so we’re thankful for that because some of them cost a fortune.
    Canadian Budget Binder recently posted..The Saturday Weekend Review #23: In-Car Espresso, Home Prices and The GardenMy Profile

  • […] Mrs PoP from Planting Our Pennies presents Are You Overpaying for Prescriptions? […]

  • Great post! I feel like most things come down to shopping around, and prescriptions are no different! $30 a month savings is nothing to sneeze at (pun intended!)
    Cat Alford (@BudgetBlonde) recently posted..4 Ways to Start Saving for a New CarMy Profile

  • […] PoP @ Planting Our Pennies writes Are You Overpaying for Prescriptions? – Mrs PoP reviews some of the different discounts available on prescription drugs. Can you […]

  • […] post Are You Overpaying For Prescriptions was included in the Financial Carnival for Young Adults hosted by Gen Y Finance […]

Leave a Reply

You can use these HTML tags

<a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

  

  

  

CommentLuv badge