Can the retail cost of a common drug vary between Medicare Part D plans and pharmacies?

Question:  Why should we care about retail drug pricing?

Your formulary drug's retail price may determine how fast you move through your Medicare drug plan coverage and what you may pay for your prescriptions along the way.  Retail drug prices are used to determine:

-- how much time you spend in the Initial Deductible (if your plan has a deductible) and 
-- what you may pay in the Initial Coverage phase and if/when you enter the Catastrophic Coverage phase (if your plan charges coinsurance – that is, you pay a percentage of the retail cost).  (Remember, the Medicare Part D Coverage Gap was eliminated in 2025.)


Example of how retail drug prices can even vary between Medicare drug plan's offered by the same company.

From the chart below, you can see an older example where several Medicare Part D plans offered by the same company have different negotiated retail drug prices for the same drug (BUPROPION HCL 75 MG TABLET (100.000 EA) (NDC: 60505015801)).

Remember that each Medicare drug plan offered by a company can also establish cost-sharing at standard and preferred network pharmacies based on the drug's formulary tier.  In this same example you can see the different Tier 3 Preferred Brand copays of: $42, $43, $47, $30, $28 - all of which are more than the retail drug price - and, as noted below, since you never pay more than retail, you will not pay the copays, but instead the plan's retail drug price.

(see current plan year data)

For example, the retail cost for a quantity of 120 tablets is approximately 4x the retail cost of the 30 tablet prescription. And since you enter the Coverage Gap or Donut Hole based on the retail value of your formulary drug purchases, you should move more quickly toward the Donut Hole when you increase the quantity of your prescription.

• Example 1 - Higher retail cost at preferred pharmacy.  But, a higher drug copay at standard pharmacy
  
  This actual example shows that you can have a higher negotiated retail price at a preferred pharmacy.  But, you will pay a significantly higher copay at a standard pharmacy, but you never pay more than retail when your higher copay is more than your plan's retail drug price, the plan's Quantity Limit (QL) for this drug affects the total retail drug cost - but not your copay.
  
  Update:  Starting in 2025, retail drug prices have less of an affect on your Medicare plan coverage as we no longer have the Coverage Gap or Donut Hole and a person will move directly from the Initial Coverage phase to Catastrophic Coverage (where, since 2024,  a person will have no additional cost-sharing for formulary Part D drugs through the remainder of the year).  These examples are from 2018, and you can notice that the Catastrophic Coverage price is often the actual low retail drug price since the retail price is more than 5% of the retail price, but still less than the minimum $3.40 price for generics in the 2019 Catastrophic Coverage phase - and, again, you will not pay more than retail.
  
  
• Example 2 - Retail prices vary between preferred pharmacies
  
  This example also shows that retail drug prices can even vary between two preferred network pharmacies, although the copays are consistent across all preferred pharmacies.
  
  
• Example 3 - Higher prescription quantities result in higher retail cost, but the same copay or cost-sharing
  
  As noted above, without the Quantity Limit (QL) usage management restriction, the retail cost calculation provided by the 2019 Medicare.gov site (pre-2019 change) shows the same multiple of 4 x 30-day retail drug costs (as we saw with plans having a QL). 
  
  And, as expected, negotiated retail drug price can vary between standard network pharmacies, although fixed copays remain the same between standard pharmacies.
  
  
• Example 4 - How preferred pharmacy retail prices compare to much-higher non-network pharmacy prices
  
  This last example shows pricing at a preferred network pharmacy as compared to the retail drug costs at an out-of-network pharmacy, although we doubt anyone would pay the prices showing in this example (over 10x the preferred pharmacy prices), but people would instead probably not use their Medicare Part D plan and simply pay the pharmacy's everyday low prices or use a Discount Drug Card prices for these low-costing generics.
  

Example 1 - higher retail cost at preferred pharmacy

Please notice that the retail drug price at the Preferred Network Pharmacy is actually higher than the retail drug price at the standard network pharmacy.  However, the cost-sharing for this Tier 1 Preferred Generic is $1 at a preferred pharmacy and $10 at a standard network pharmacy.  You can see that the retail cost at the standard retail pharmacy is significantly lower than the $10 copay, and since you never pay more than the negotiated retail price, you pay the retail price - and not the $10 copay.

This Medicare Part D plan also has the usage management restriction of a 30 tablet / 30 days Quantity Limit (QL).  If the QL can be exceeded (for example, if the plan allows120 tablets / 30 days), the retail price increases by a factor of the QL, but the coverage cost, even for the excess amount of  medication, does not change.

In this example, we see that two preferred network pharmacies can also have different retail drug prices, although the cost-sharing for this Tier 2 (Generic) is the same at all preferred pharmacies.

Example 3 - retail drug prices vary between standard (non-preferred) network pharmacies  

In this example, we do not have the usage management restriction of a Quantity Limit.  So the plan member with a larger prescription (120 tablets / 30 days) would not need to file a formulary exception to receive this additional amount.  The retail cost calculation provided by Medicare.gov shows the same multiple of 4 x 30-day costs.

Example 4 - higher retail prices at a preferred pharmacy, but much less than non-network pharmacies  

In this example, you can see that at the preferred network pharmacy, there is a higher retail drug price, even when compared to standard pharmacies in our other examples.  We also can see that the out-of-network pharmacy retail costs are over 10x (10 times) the preferred pharmacy prices.

In most cases, people would not pay such high prices, and would instead pay the pharmacies "everyday low prices" without using their Medicare Part D coverage - or people could use a pharmacy Drug Discount card at this non-network pharmacy.

Please note that the 2018 Medicare.gov site showed no coverage at a non-network pharmacy, except for the 37% Donut Hole discount. (This may be assuming the requirement that "Part D sponsors shall provide the applicable discount for out-of-network paper claims submitted by Part D enrollees." So only people who used a non-network pharmacy and then submitted their formulary drug-purchase receipts to their Medicare drug plan would receive the 2018 Donut Hole Discount - Reminder: No Donut Hole discount exists beyond 2024).