Why Are My Prescription Drugs Sometimes Cheaper Without Insurance?

a pharmacist working in a pharmacy

Picture this:

You spend hundreds of dollars per month on your health insurance. You are prescribed a medication by your doctor that levels out your blood pressure.

Once you get to your chosen pharmacy, the pharmacist informs you the drug will cost you $150 with your insurance for only a month-long supply.

You ask, “How much would it be without my insurance copay?” They give you a price that is half that of what your insurance would give you.

How does this happen?

Unfortunately, the answer isn’t black and white. Prescription drugs are a complex animal, one that can be life and death for many individuals.

But this phenomenon is worth exploring.

How Drug Prescription Costs Work

Prescription drugs go through a rigorous and costly research process before they make their way onto the market.

The process starts with “Drug Discovery” where a researcher identifies a new chemical compound that has potential benefits. Next, an application for testing on the medication on animals is filed with the FDA. Once approved, animal testing is started and if benefits are discovered and safety is guaranteed, clinical trials on humans begin.

As you might imagine, this is a costly process. Most drug companies spend millions to get their drugs approved of by the FDA.

However, just because a drug is approved of by the FDA doesn’t guarantee it will make it. Unlike other businesses, the prescription drug industry has another barrier to entry: insurance companies. Pharmaceutical manufacturers must negotiate drug prices with insurance companies. This changes the costs dramatically.

Prices Are based on Perceived Market Value

The perceived value of a drug determines its price. Price is not based on the effort put into discovering and then manufacturing the drug. Instead, it is based on three components:

  1. How many patients the drug can treat
  2. What similar drugs are on the market
  3. How the drug can improve a patient’s life

It is the insurance company’s job to negotiate cheaper prices for customers. In certain cases, though, insurance companies don’t have the power to negotiate a lower price because of the drug’s value. If it can save lives, is the only drug available to treat a disease, or is only used for a select group of people, they lose the battle.

This is just one-half of the battle, however. The other part of the equation is when your insurance company makes your prescription medications more expensive.

When Your Prescription is More Expensive with Insurance

The situation we posited at the outset is not a rarity. In fact, it happens every day across Texas. Consumers go to fill their prescription-only to pay a set co-pay demanded by their insurance company and overpay what they would if they paid cash.

A practice known as clawback is one of the reasons you might pay more with insurance. If you have a set co-payment for your prescription medications, regardless of the cash price, some insurance companies require pharmacies to send the difference between what they collect from the consumer and what the insurers agree to reimburse pharmacies.

The other variable is pharmacy benefits managers. These professionals negotiate with drug manufacturers to secure better prices for consumers, especially for brand-name medications. However, generic medications often don’t receive the same treatment. When generic medication prices are negotiated, they are done so in bulk, which means you won’t get a discount on every generic drug out there.

What’s this lead to? Different priced drugs with different insurance companies. The frustration doesn’t stop there. Trying to decipher what drugs cost is a near-impossible task.

Prescription Drug Costs Are Anything But Transparent

At the end of the day, it is not in the best interests of drug companies to be clear about how much their drugs cost.

Even if you could figure out exactly how much a drug costs, you won’t be able to isolate how much other people are paying for the same drugs.

Since each insurance company has the power to negotiate drug costs, what one company is paying $750 a pill for, another company might pay half that for.

Changes in Prescription Drug Legislation

In the past, pharmacists were banned from telling consumers if the cash price for prescription drugs was cheaper. However, under the new legislation, that is no longer the case.

Legislation approved by Congress has removed the gag order on pharmacists. They can now let you in on the secrets of medication prices. If a medication is more expensive with your insurance, they can tell you and offer a different solution, like paying cash.

Technically the law doesn’t take effect until January 1, 2020, but once it does, the cash price for medications can be revealed. This leaves you with more options. The first being to obviously ask your pharmacist if you can pay less by paying cash. Your pharmacists might also offer up that information freely.

The bottom line is that legislation has made it possible for you to reduce prescription drug costs by paying cash instead of using your insurance if there is a lower-cost option.

But before you jump on the cash-for-prescription-drugs bandwagon, consider some downsides of doing so.

The Dark Side of Paying Cash

There are a few risks and downsides to paying cash. These include the following:

  • The risks of overlapping medications.

Insurance companies work with your pharmacy to ensure that you aren’t taking a medication that interacts with another. If you’re paying cash, your pharmacists won’t have your list of medications on hand. This could present a serious problem if you aren’t careful.

  • Medications you buy won’t count towards your deductible.

If you pay cash for your medications, keep in mind that those medications will not count towards your insurance deductible. Instead, you’ll be paying for them without getting any closer to that pesky deductible. If it is worth it for you, keep paying cash, but don’t forget about this important detail.

  • Prices will fluctuate

When you pay cash for your medications, your prices will vary from month to month. So, while you might get a discount one month, the next month your prescription drug cost might skyrocket.

Work With A Benefits Provider For The Best Advice

If you’re not sure how to lower your prescription drug costs or whether or not you should be paying cash, consider working with the team at Primary Care Insurance Solutions. We can help you navigate the complex waters of prescription drugs and insurance claims.

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