Understanding Your Prescription Costs

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August 17, 2023

Have you ever gone to pick up a prescription and been surprised by the cost being either more or less than you expected? Many of us have been there. One of the most common questions thatwe get is “What contributes to the cost of prescriptions?”  To shed some light on this important topic, we’ve summarized a list of the most common factors that impact the total cost of prescriptions at the pharmacy:

  • Brand vs. Generic - Brand name drugs are divided into two categories: preferred brands and non-preferred brands. Preferred brands tend to have lower out-of-pocket costs for patients and non-preferred brands tend to have higher out of pocket costs. After a brand name drug’s patent expires, other manufacturers are allowed to produce generic versions of the drug. A generic drug is identical to the brand version in form, safety, strength, quality, and intended use. They are, however, substantially cheaper than their brand-name counterparts.
  • Traditional vs. Specialty - Most medications are considered traditional drugs and can be filled at any retail or mail-order pharmacy. Specialty products are high-cost medications often used to treat more complex health conditions. These drugs typically require special handling, administration, or monitoring, and generally need a prior authorization before they can be dispensed. Usually a specialty pharmacy will need to fill specialty medications and will then ship them to you. They tend more expensive as well.

Picking a pharmacy to lower your prescription drug costs

Where you fill your prescription can often have a surprising impact on cost.  If you’re interested in how the cost of your medications differs by pharmacy, check out our Find My Meds tool on our Member Portal.  

Pharmacies for Traditional Drugs

  • Highest-cost pharmacies: Typically larger chains that have more convenient locations but charge more for their medications.
  • Lower-cost pharmacies: Independently owned and operated pharmacies usually charge less than big chains.
  • Lowest cost pharmacies: Mail-order pharmacies, such as Amazon Pharmacy, generally have the lowest prices but require a bit more advanced planning to allow time for the pharmacy to ship the medication to your home.

Pharmacies for Specialty Drugs

Most specialty drugs need to be filled at a specialty pharmacy because they require special handling (e.g. refrigeration) and are higher cost. There are select specialty medications filled at retail and mail-order pharmacies.

What impacts my copay at the pharmacy?

Backup, what's a copay again?

Your copay or coinsurance for a drug covered by your pharmacy benefits plan is driven by your plan’s formulary and the tier each medication is assigned to. Your formulary is split into tiers. Each tier (1, 2, 3) typically has a different copay amount.

Why is my copay $0 for some prescriptions?

Your plan may offer coverage for certain preventative medications so that you have a reduced copay or no copay at all. Certain medications are required to have a $0 copay based on the Affordable Care Act (ACA).

What about Copay Cards & Coupons I've heard about?

Some drug manufacturers offer copay cards and coupons that cover part or all of a member’s deductible and copay for certain medications. SmithRx has numerous programs through our Connect 360 program where we help patients access and use these copay cards and coupons to reduce costs.

Important pharmacy terms that may impact your prescription costs

  • Drug Formulary - Your formulary is a list of drugs specific to your prescription benefits coverage and outlines the drugs covered at different tiers by your plan. Your formulary is split into tiers and this is how your copay is calculated.  You can look up coverage of medications on your plan through the SmithRx Member Portal.
  • Quantity - Medications must be dispensed in line with FDA-approved parameters (i.e. 1/day or 2/day, etc.), what your provider writes the prescription for, as well as the quantity limits listed on the formulary.
  • Dosing - Some medications have a standard strength but others have various strengths available. For example atorvastatin used to treat high cholesterol is available as 10mg, 20mg, 40mg, and80mg. The dose/strength the member takes depends on their condition and what the provider prescribes.
  • Formulation - Medications can come in different forms, including oral (e.g. tablets or capsules), topical (e.g. gels or creams), injectable (e.g. syringe or pen), and inhaled (e.g. aerosol or lyophilized), among others.  Prices can vary based on the formulation because of how each is manufactured, the potency each offers, differences in shelf life, and much more. Some drugs come in multiple formulations, so it’s important to inquire about which formulation is covered by your plan, which is most cost-effective, and which is right for you.
  • NDC - NDC stands for National Drug Code.  It’s the way the FDA (US Food and Drug Administration) tracks medications.  One medication name (e.g. Atorvastatin) may have several or dozens of NDCs. As generics launch for a specific drug, there are more NDCs for that product. NDCs can change frequently (get added, get removed, etc.) but not all NDCs are included in a formulary. 6While NDC isn’t something patients get directly involved with, it may explain the variance in the price of a drug.
  • Time of Year - It’s also important to remember that if you have a deductible to meet, your out-of-pocket costs may be higher at the beginning of your plan year than towards the end, as you’ll need to pay toward your deductible before a lower copay or coinsurance takes effect.
  • Dispense as Written (DAW) - Depending on your medication therapy, your provider may specify whether a generic is acceptable or if a brand must be dispensed without substitution.

Hopefully this list sheds some light on the factors that impact the cost of your medications. SmithRx members can always call our Member Support team at 844-454-5201 if they have any questions about their pharmacy benefits or how they can reduce the cost of their medications.

Thanks to Account Manager, Andrew Yost, for the inspiration for this post!

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A new type of pharmacy benefits manager, SmithRx is working to reduce pharmacy costs by reimagining the traditional PBM as a Drug Acquisition Platform built on transparent modern technology that aligns with the needs of our customers.

Written by


A new type of pharmacy benefits manager, SmithRx is working to reduce pharmacy costs by reimagining the traditional PBM as a Drug Acquisition Platform built on transparent modern technology that aligns with the needs of our customers.

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