Prescription Drugs - It Pays to Save Money

The HWN Team | Insider
Prescription Drugs - It Pays to Save Money

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The cost of drugs continues to sky rocket. Once you to understand how drug pricing works, you will be able to make some choices that will reduce your overall prescription drug expenses. It pays in the long run!

The U.S. system is unique in that its health insurance system is primarily an employer based system as opposed to the rest of the world. In other words, lose your job, lose your insurance and drug coverage.

Senior citizens have been provided some relief through the Medicare Part D prescription plan (unless you have enough drug costs to fall through the "donut hole") But those without insurance face the high cost of prescription drugs without any cushion.1

In 2007, a brand name prescription cost $119.31 on average and a generic prescription cost $34.34. Given that Americans use on average 12.6 prescriptions per capita, that’s a good deal of cost to absorb, especially if you are one of the people whose needs require many more prescriptions each year.2

For those fortunate enough to have prescription coverage through an employer, payment is either co-insurance – fixed percent of the cost of a prescription or more typically it's a "co-pay based on a tiered system". For example, if your Lipitor costs $50/prescription, your co-pay might be a fixed $20 for a brand name drug or $10 if you pay a fixed 20% prescription cost.3

Insurers want to encourage their beneficiaries to use the least expensive drug that works for the situation. Therefore, they cover differing drugs at differing levels to encourage cost-conscious choices. Insurers prefer drugs in the following order generic if possible, the least expensive alternative, then preferred brands, those that they can purchase least expensively followed by brands and lastly lifestyle. The co-pay tiers reflect these preferences.

Since co-pays are much more common it's important to learn about the 'tiers' so you'll be able to implement money saving strategies. Approximate co-pay amounts are: generic - $10, preferred brand - $26, brand - $46 and lifestyle - $75.

Here's the tiers

Brand name

Drug companies spend $10-20 million dollars over 8-10 years to produce a new drug. Once the drug has been patented (the drug company claims credit for the drug’s chemical formula, preventing anyone else from using that formula for seven years) and passed Federal Drug Administration (FDA) approvals, the new drug is launched into the marketplace with a brand name, e.g., Aricept or Advair.

The drug company has seven years or less to cover all of the costs of research and marketing and make a profit before the patent expires and any drug company is legally allowed to produce the drug. Therefore, brand name drugs are typically extremely expensive but, hopefully they bring new benefit to users.


Once a drug goes “off patent”, its formula is available to any company that wants to produce it. The non-patented version of the drug is called the generic version. For example, ibuprofen is the generic name for Motrin (which used to be a prescription drug). These drugs are typically very inexpensive, since much of a prescription’s cost is actually the added cost of research and marketing, not the actual drug ingredients.


There are many drugs available that perform the same function, such as Lipitor and Zocor, two cholesterol lowering drugs. They are considered to be “therapeutically equivalent” meaning that do the same thing in the same way, e.g., lowering blood pressure, easing depression, etc. While drugs within the same therapeutic category aren’t actually identical, many people who benefit from one of these drugs could just as easily benefit from another of the drugs (sometimes in a different dosage).

Health plans make buying deals with various pharmaceutical manufacturers. Often, they make a deal with a few drug manufacturers within each category and “prefer” their members to use those drugs because they can be purchased by the health plan less expensively.


There is a new and growing area of drugs that may be controversial in terms of being covered by health plans. Viagra, Cialis and Levitra, all prescribed for erectile dysfunction, fall into that category. Some health plans are willing to pay for these prescriptions but at a lower level of coverage.4

So, here's how you can reduce your drug bill.

Choosing generics

We know that in general, the generic form of a drug works just as well as the brand name drug. In fact, though there may be differences in appearance, the therapeutic formulation is identical. Most health plans and many states require that the generic form of a drug be dispensed unless the prescribing physician specifically opposes the generic version. Interestingly, although 75% of all available drugs are available in generic form, only 65% of drugs prescribed are generic. While this statistic may be the result of greater use of newer, more effective brand name drugs, there may also be room to improve the use of generic drugs.

Determine whether your current prescriptions are for generic or brand name drugs. You may be able to tell from the label. If not, you can query on-line (search the drug name and the word generic and it will either confirm that it’s the generic or give you the generic name) or ask your pharmacist. If you find brand names among your prescriptions, find out if there is a generic version available.

Speak with your doctor about why you are taking a brand name drug when a generic is available. Recognize that there may be a legitimate reason related to your specific situation. However, if the reasoning has more to do with the doctor’s comfort level and he or she cannot provide you with reasonable evidence that the brand is needed, you can think about asking to try the generic version. Naturally, you should work closely with your doctor or, get a second opinion, before making a switch.

Choosing the preferred brand

If you are taking a brand name drug, it may be worthwhile to check with your health insurer to determine whether the plan has a preferred alternative brand that would cost you less. If so, talk with your doctor about whether it would be appropriate for you to try the preferred brand drug. Doctors are very aware of the cost burden that prescription drugs place on their patients. Many doctors simply don’t have the time to analyze every drug plan and determine the most cost-effective choices for your situation.

Importantly, your doctor may have chosen the particular drug you are using because of its specific formulation, dosing availability or for some other very good reason. He or she should be pleased to explain the choice so that you know either 1) you have exactly the right drug for your situation or 2) it may be possible to try a less costly alternative.

As always, your doctor is your partner in care. You should feel comfortable asking these questions – you certainly have a right to know – and your discussion should make you confident in the choices that have been made. If these discussions leave you with concerns, try talking with your pharmacist, get a second opinion or bring in a trusted friend or family member as an advocate to help you sort out the information you have received and the evaluate your relationship with your physician.

Mail Order

Many health plans offer the opportunity to fill prescriptions by mail. Often, there is a cost advantage to using the mail order method, such as getting a three months’ supply for a one month or two month co-pay. Check out your plan’s mail order option. If you can get a break on the co-pay, it’s almost always worth the initial extra work to get into the program. That extra work is typically asking your doctor to write a prescription for a three month supply of your medicine and sending that prescription to the mail order pharmacy along with all of your personal information and a payment mechanism.

Half –tabbing

Half - tabbing is a little known but sometimes excellent way to reduce prescription costs by fifty percent. Let’s go back to the discussion about the price of drugs. In most cases, the price of the drug is almost entirely related to research, manufacturing and marketing costs. The ingredient costs are typically minuscule. That’s why you may find that the cost for Aricept 5 mg and Aricept 10 mg is the same, $165.95. Even though the 10 mg tab has twice as much drug, the price is the same because the ingredient cost has so little bearing on the price.

This oddity presents an opportunity. If you are taking a medication that comes in a variety of dosages, find out if you can buy that medication in double the dosage. If that’s possible, you may be able to split the tabs in half and make your prescription go twice as far.

Only your physician can decide if half-tabbing will work in any particular circumstance. There are some drugs that must be dosed with so much precision that an inadvertently poorly cut tablet would jeopardize the benefit. There are also some medications that can’t be split or are shaped in a way to make it difficult to accomplish effectively. However, it’s very worthwhile to research the possibility.

Healthcare Discount Cards

If you have no insurance at all, you should look into the acceptability of healthcare discount cards in your area. These cards do not represent an insurance plan. Instead, the card company has negotiated discounts with healthcare providers on your behalf. When you buy into the card plan, you will receive discounts at participating providers.

In order to decide if this strategy is useful to you, you have to find out which cards are accepted at the pharmacies you use. Your pharmacy may not have a list of programs in which they participate. You may have to identify card programs yourself (go online and search for discount medical and/or prescription cards) and ask about specific programs. Once you find the programs that are accepted, you need to compare the cost of belonging to the program, usually a joining fee and a monthly fee to the savings you will enjoy by receiving the discount. If you must spend substantial sums of money on prescription drugs, a discount card may save you money.

OK, here's how it pays

Let's say you pay $46/month or $552/yr for a non-preferred brand drug. With your physician’s help, you discover that: The preferred brand works well for you. Your cost is reduced to $26/month or $312/yr. You can purchase a three month supply by mail order for one co-pay. You now pay $26 four times a year or $104. Your medication can be half-tabbed, doubling your prescription’s duration. Now you pay $52/yr.

You have saved over $500/yr on one prescription! It’s unlikely that you will find all of these opportunities in one prescription, but it’s certainly possible.5-7

The Bottom Line

Yes, prescription drugs are expensive, but they are often the key to living a healthy, high quality life. Don't be one more unwilling victim of prescription drug costs.

It’s worth taking the time to learn about your prescriptions and your health plan so that you have the best opportunity to make the cost more affordable. And if you do not have health plan coverage for prescriptions, you absolutely owe it to yourself to do this research and save money if you can. It pays in the long run!

Published February 3, 2009, updated August 18, 2012


  1. Davis K, Census Data on Growing Number of Uninsured Make Clear: National Health Care Strategy Is Needed, The Commonwealth Fund, August 2007
  2. Prescription Drug Trends, Kaiser Family Foundation, May 2010
  3. What are payment tiers for drugs? My Medicare Matters, May 2010
  4. Co-pay tiers, Managed Care, 2006
  5. Anderson J, Save Money on Prescriptions, Health care, Kiplinger, May 2008
  6. Meadows M, Saving Money On Prescription Drugs, FDA, September-October 2005
  7. Ramirez L, Tips to help patients save money on prescriptions,

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