How Medicare Prescription Drug Costs Work

 

 

Medicare Part D and Medicare Advantage plans with drug coverage group medications into tiers.
Your tier affects how much you pay at the pharmacy.

 

Preferred Generic Drugs

Lowest-cost medications on the plan.

• FDA-approved generics

• Usually the lowest copay

• Often $0 to a few dollars

• Same active ingredients as brand-name drugs

➡️ This is usually the cheapest option.

 

Standard Generic Drugs

Generic drugs that cost slightly more.

• Still FDA-approved generics

• Higher copay than preferred generics

• Much cheaper than brand-name drugs

➡️ Still affordable, just not the lowest tier.

 

Preferred Brand Drugs

Brand-name drugs with lower negotiated costs.

• Brand-name medications

• Lower cost than non-preferred brands

• Higher cost than generics

➡️ Used when generics aren’t available or appropriate.

 

Non-Preferred Brand Drugs

Brand-name drugs that cost more.

• Higher out-of-pocket cost

• May require approval or limits

➡️ Covered, but usually more expensive.

 

Specialty Drugs

High-cost drugs for complex conditions.

• Used for serious or chronic illnesses

• Highest costs

• Often charged as a percentage

➡️ These work differently than everyday prescriptions.

 

Pharmacy Choice Matters

Preferred Pharmacies

• Lower copays

• Contracted with the plan

Standard Pharmacies

• Covered

• Higher copays

➡️ Using a preferred pharmacy can save money.

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Preferred vs. Standard Pharmacies

Medicare drug plans group pharmacies as preferred or standard. The difference is cost, not quality. 

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Preferred Pharmacies

• Lower copays or coinsurance

• Usually the cheapest option

• Same medications and service

• Chosen by the plan for lower pricing

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Standard Pharmacies

• Still in-network

• Higher copays than preferred pharmacies

• Same covered drugs

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What Matters Most

• Same prescription, different price

• Preferred pharmacies cost less

• Pharmacy status varies by plan and location

• Status can change each year

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Quick Example

Preferred pharmacy: $0–$5
Standard pharmacy: $10–$20+

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Pro Tip

Always check if your pharmacy is preferred before enrolling — it can save you money all year.

 

Important to Know

• Every plan has its own drug list

• Costs and coverage can change yearly

• Prices vary by drug, pharmacy, and dosage

 

Important Information & Disclosure 
Prescription drug coverage, formularies, tiers, pharmacy networks, and costs vary by plan, carrier, county, and

contract year and may change. Information is for educational purposes only and does not guarantee coverage,

costs, or enrollment.