Many pharmaceutical companies charge high prices for brand-name drugs but then offer drug coupons and vouchers to decrease your out-of-pocket costs. Quite frankly, they should just decrease the price in the first place! Because that’s not the way the world works, the question is whether or not you can use these drug coupons when you are on Medicare.

The Law

The Anti-Kickback Statute that was instituted as part the Social Security Amendments of 1972. It states that an individual or organization cannot offer goods or services to someone in return for referrals or payments that would take money from federal programs.

Medications, unfortunately, fall into this category. That means that anyone using Medicare cannot take advantage of these prescription discounts.

You may be able to use prescription drug coupons but only if you decide not to use your Part D benefits for that particular medication.

Gag Rules

The Centers for Medicare & Medicaid Services (CMS) has a rule that requires a pharmacist to automatically use your Part D insurance coverage unless you specifically tell them not to.

The problem was that many states also had a pharmacy “gag rule” written into contracts between pharmacists and the companies that manage prescription drug plans, known as pharmacy benefit managers (PBMs). The clauses specifically prohibited pharmacists from telling patients when they could save by paying cash price instead of their insurance copay.

That changed when Congress passed the Know the Lowest Price Act of 2018. This new law allowed pharmacists to talk to you about your options. It took effect on January 1, 2020.

They can now tell you:

• About less expensive generic versions of the medications you are taking.
• About savings programs that could reduce costs below your copay.
• When it may be cheaper to pay cash price for a medication than to pay your plan’s copay.

Pharmacists are not required to share cost-saving information every time you go to the pharmacy. They will if you ask them about it. Speak up for yourself!

Cash Price vs. Your Part D Benefit

Having insurance is helpful but it doesn’t always mean you are getting the lowest price.

One study by the Journal of the American Medical Association found that a patient’s copay was higher than the cash price as much as 25% of the time!

After you figure out your lowest cost option, you can:

Use your prescription drug coverage as you normally do. This takes the least effort. What you pay will apply towards your Part D deductible and/or your true out-of-pocket (TrOOP) costs.

Pay cash price and defer your prescription drug coverage. This allows you to use drug coupons if you want to. The catch is that you cannot then apply what you pay towards your Part D deductible and/or TrOOP costs.

Pay cash price at a pharmacy in your plan’s network and send a receipt to your Part D plan. Your Part D plan will not reimburse you for what you spent but it will credit that amount toward your deductible and/or TrOOP costs when you are in the deductible phase of your coverage or in the coverage gap. This is the best of both worlds. This option is buried so deep in the fine print, it is not mentioned anywhere in the Medicare & You Handbook.

You CAN use a drug coupon and have your out-of-pocket costs credited toward TrOOP but only when you’re in the deductible phase of your coverage or when you’re in the coverage gap.

When to Consider Drug Coupons

It is not always obvious when you should use a drug coupon instead of using Medicare. The following are some scenarios to consider:

Changes to Your Part D Coverage: Your Part D formulary can change at any time. If a medication you need is no longer covered, your best option is to change to a Part D plan that does cover it. You can do this during the Medicare Open Enrollment Period, October 15 to December 7. In the meantime, you may consider using drug coupons to keep costs down.

A Medication Isn’t on Your Part D Formulary: If formulary-covered medications have not been effective for you, it may be reasonable to consider a medication that is not covered by your Part D plan. Since your Part D plan is not going to pay for it anyway, a drug coupon may be a great way to give it a try. If it works out, you can change to a Part D plan that covers it during the next Open Enrollment Period.

Donut Hole Costs: When you reach the donut hole, i.e., the Part D coverage gap, you could pay as much as 25% toward the cost of your medications, depending on your plan. A prescription drug coupon could decrease those costs. Because what you spend will not be credited toward TrOOP, not using your insurance will keep you in the coverage gap longer. This is an important consideration because your drug costs drop precipitously when you exit the donut hole. Is it better to save now or later?  You should do some number crunching to see which will save you the most.

If you continue to rely on drug coupons, you have to consider what will happen when those coupons are no longer available. Your out-of-pocket costs will go up, especially if you are unable to find an affordable Part D plan that covers those medications.

Despite what you’ve been told in the past, drug coupons are still an option when you’re on Medicare.

 

Public Law 115 – 262 – Know the Lowest Price Act of 2018. Government Printing Office. https://www.govinfo.gov/app/details/PLAW-115publ262

Tudor, C. (2006). CENTER FOR BENEFICIARY CHOICES: HPMS Q & A – Lower Cash Price Policy. Centers for Medicare & Medicaid Services. https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/QADiscountsandTrOOP_100606.pdf

Van Nuys, K., Joyce, G., Ribero, R., & Goldman, D. P. (2018). Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs. JAMA, 319(10), 1045. https://doi.org/10.1001/jama.2018.0102