When paying cash for prescriptions beats using insurance

pharmacist and customer
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It’s usually taken on faith by health care consumers that you can save big money on prescriptions when using your insurance company’s mail-order pharmacy program.

But there are some instances where it’s a heck of a lot of cheaper to pay cash for a medication at the pharmacy counter, rather than to order it through your insurer’s pharmacy benefits manager program.

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Paying $285 for a drug that should cost $40?!?

PBS News Hour recently ran a piece that spotlighted the story of one woman and her husband who were going on a trip and needed to stockpile a 90-day supply of telmisartan. The woman was prescribed the drug to control her blood pressure after a mini-stroke about two years ago.

The husband tried to order the generic drug through Express Scripts, the pharmacy benefits manager (PBM) that also provided a mail-order service for their insurer Anthem.

But here’s the rub: The couple had paid $285 for a 90-day supply of the drug about a month earlier. Because 90 days hadn’t passed, Express Scripts refused to sell an additional 90-day supply to the couple.

Not knowing what to do, the couple went to Costco and asked what the cash price was for the telmisartan. When they were told it would be roughly $40, they paid for the medication out of pocket, since they couldn’t run it through insurance anyway.

But while that solution was simple enough, the explanation of why Costco could charge $40 for the same generic drug that Express Scripts charged $285 for is anything but.

A tale of formularies, kickbacks and the funnel

To understand why there’s such a drastic price difference between the mail-order option through insurance vs. an in-pharmacy cash purchase, you’ve got to understand how mail-order drug pricing is set by the PBMs.

In this particular case, the generic telmisartan was listed as a “nonpreferred brand” by Express Scripts.


In essence, Express Scripts was saying it didn’t make it into the funnel of drugs that are considered “formularies” — that list of medications that an insurer recognizes and is willing to pay for.

The decision about which drugs make it into the funnel as formularies, and at what pricing tier they are set, is negotiated on a case-by-case basis by the drug companies and the main PBMs like Express Scripts, CVS Caremark and Optum Rx.

But unfortunately, there’s more than meets the eye to the negotiations.

As PBS reports, the PBMs receive what can only be described as financial kickbacks from the drug companies on certain medications. These kickbacks, which the PBMs reportedly pocket part of before sharing the rest with the insurer, are euphemistically called “rebates” in the parlance of the industry.

A big rebate may mean a certain drug gets listed as a Tier 1 drug, which would put it on the cheapest pricing rung when you need a prescription. And cheap pricing, of course, puts Tier 1 drugs in direct reach of the largest number of customers across a variety of income levels.

That widespread availability, in turn, creates additional demand for the drug — simply because it is among the cheapest medications on the market.

In case you’re wondering, the tier system is universal in the industry and goes up to Tier 4 for the most expensive non-preferred drugs — which is what Express Scripts deemed telmisartan in our example here.

How to save money on prescriptions

Since there are a lot of factors of out of your control when it comes to drug pricing, you’ve go to focus on what you can control. Try these suggestions:

Know what you’re going to pay before you head out to the pharmacy

PBMs work best for Tier 1 medications that are a recurring fixture in your life. But sometimes you need a short-term prescription for something like an antibiotic as soon as possible. In that case, it wouldn’t make sense to use a mail-order pharmacy through your insurance company.

Fortunately, there’s a way to know the cash price at nearby pharmacies without having to call them all individually or go in person.


It’s called GoodRx and it’s a website and mobile app that lets you punch in the name of your prescription to find out the cash price in your area, allowing you to make the best choice for your wallet and your health.

Go north for cheaper prices

For years, people who lived along the Canadian border have looked to our neighbor to the north for prescription savings. Canada has been a viable alternative for residents from Washington State to Maine. They simply go across the border and fill their scrips for a fraction of the cost for an identical medication.

If you don’t live in a border state, there are legitimate Canadian pharmacies online where you can fill a scrip. From time to time, our federal government will seize a shipment as a show of force, but that is a rare thing and the pharmacy will usually replace it for you at their cost.

If you need help distinguishing a legitimate online pharmacy from a shady one, here’s what you need to know:

  • Avoid websites that don’t require you to have a prescription.
  • Be very wary if they’ll sell you a prescription in exchange for completing an online questionnaire.
  • Ridiculously low prices are a clue that something isn’t right.
  • Ask if you can get in touch with a licensed pharmacist who works with the online seller. If you can’t, that’s a bad sign.
  • Be sure wherever you’re buying from has a physical street address.
  • Don’t accept any shipments from other countries.
  • Check that a seller is verified by the National Association of State Boards of Pharmacy (NABP).
  • Look for sites ending in .pharmacy as evidence of NABP verification.
  • Check for VIPPS (Verified Internet Pharmacy Practice Sites) certification, which indicates the seller has passed rigorous vetting by the NABP.

Look at the warehouse clubs — even if you’re a non-member

The beauty of Costco is you don’t need to be a member to use their pharmacy. You can simply show up and explain you want a prescription filled. Many Costcos have a separate entrance for their pharmacies to accommodate walk-in non-members.

A recent report from The Florida Sun Sentinel found Costco handily beats the competition when it comes to drug pricing. Here are the price points the newspaper found when it called around to shop a Lexapro prescription:

  • Costco – $6.99
  • CVS – $114.99
  • Publix – $118
  • Sam’s Club – $83
  • Target – $147.99
  • Walgreens – $116.99
  • Walmart – $115.88
  • Winn-Dixie – $179.99

Ask for a ”˜biosimilar’

The Wall Street Journal recently wrote about a move in the U.S. to lower drug prices through something called “biosimilars.”

Simply put, a biosimilar is a drug that’s more affordable than the dominant player in the market and is chemically exact in its structure to the industry leader.

The next time you’re with a doctor, if there is a medicine you are prescribed that you can notafford, try asking for a biosimilar!


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