One of the health insurance trends we see across all carriers is the increased cost of drug copays. Almost every plane has moved to a Tier 2 Copay of $50. For the last decade, tier 2 has averaged around $35-$40.
When you look into health insurance, you’ll quickly realize that prescription drug tiers matter. Drug tiers classify medications by cost, and the insurance industry uses copay to steer members to lower-costing drugs in the same therapeutic class.
Understanding Drug Tier
Insurance providers set medications into different categories.
Every plan/carrier is different, but typically, there is a 4-tier.
- Tier 1: Generic drugs- lowest costing
- Tier 2: Preferred brand-name drugs.
- Tier 3: Non-preferred brand-name drugs
- Tier 4 (or Specialty): Specialty drugs are expensive and often advertised on TV.
How Tier Copays Work
- Flat Copays:
- Traditional health plans have a set copay for each drug tier: the amount you pay for the medication.
- Some health will require the member to pay a % of the drug cost.
Why “Preferred” Matters
A “preferred” brand-name drug often lands in a lower Tier because the insurer has negotiated a deeper discount with the manufacturer.
That arrangement allows the member to pay less than you would for drugs in higher tiers.
Copay Set By the Health Plan:
- Negotiated Discounts: Insurers often secure lower prices for preferred drugs
- Plan Structure: High-deductible plans might require you to pay more upfront until you meet your deductible.
- Pharmacy Choice: Your insurer may have a negotiated preferred contract with certain pharmacies, meaning you’ll pay less if you use these “anchor” pharmacies. Many drug plans will prefer pharmacy pricing, resulting in lower copays.
- Formulary Updates: Insurance companies or pharmacy benefit managers will update their drug formulary list typically no more than twice a year. A formulary change can directly impact if a drug is moved or even removed from the list.
Drug Formulary: This is the list of prescriptions approved for use and covered by specific health plans.
If we look at a drug formulary for 2025 and how many drugs are covered.
- Tier 1= 112 drugs
- Tier 2= 89 drugs
- Tier 3= 76 drugs
- Tier 4= 31 drugs
Now, let’s look at being an active consumer of healthcare.
Between Tier 1 & Tier 2, 73 drugs can treat the same condition.
Those conditions are
- Cardiovascular
- Diabetes
- Dermatological
- Central Nervous System Agents (mood disorders, anxiety)
- Antibiotics
- Respiratory Conditions (asthma, COPD)
If a tier 2 drug is going to cost $50 a month to treat you, isn’t it worth asking your doctor if the tier 1 drug could have the same impact?
We are going to continue to drug copays increase, and everyone is going to have to take an active role in their health care to try to save money.
