Here’s Why Drugs are So Expensive Even with Medicare Coverage, In One Chart

Thomas Goetz
Thomas Goetz, MPH, leads the Research team at GoodRx.
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It seems counter-intuitive: People who have insurance coverage through Medicare are finding that they still pay a lot for their medications. It turns out that’s no illusion — people really are bearing an increasing portion of the cost, every year.

A new analysis by Avalere Health shows that since 2011, Medicare insurance plans are increasingly shifting drugs into higher tier, more expensive formulary lists, putting more of the burden of drug costs on patients.

Source: Avalere Health. (2018). Generic Drugs in Medicare Part D – Trends in Tier Structure and Placement


The analysis shows, in plain terms, how dramatically insurance coverage for medications has changed in just the past few years. While Tier 1 drugs typically have a small co-pay (or even no co-pay), co-pays get much more hefty for drugs in Tiers 2 or higher. This means that often the co-payment is more than the retail cost of the drug, especially when discounts (such as those at GoodRx) are factored in.

Indeed, with more people on high-deductible plans, it’s increasingly evident that using insurance — even Medicare — may not provide the cheapest prices for a prescription. A recent research letter published in JAMA found that for nearly one in four prescriptions, the co-payment fee was more expensive than the actual cost of the medication.  

This data is yet one more reminder that paying for medications is getting a lot more expensive, making the discounts available at GoodRx more relevant to more people, including people with Medicare.

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