Tiered Copays: Why Your Generic Drug Costs More Than Expected

Have you ever picked up a generic prescription and been shocked at the price? You thought generics were supposed to be cheaper - but your $5 pill suddenly costs $45. What’s going on? It’s not a mistake. It’s not fraud. It’s tiered copays - a system designed to control drug spending, but one that often leaves patients confused, frustrated, and out of pocket.

How Tiered Copays Work

Most health plans don’t charge the same amount for every drug. Instead, they sort medications into tiers - like levels in a video game - and each level has its own price tag. Tier 1 is usually the cheapest. Tier 5 is the most expensive. The idea is simple: encourage you to pick drugs that cost the plan less, and you’ll pay less too.

But here’s the twist: not all generics are in Tier 1. In fact, about 12% to 18% of generic drugs are placed in Tier 4 or 5, even though they’re chemically identical to cheaper versions. Why? Because the drugmaker didn’t pay enough to the Pharmacy Benefit Manager (PBM) to get preferred status.

PBMs - companies like CVS Caremark, Express Scripts, and OptumRx - are the middlemen between insurers and drugmakers. They negotiate discounts and rebates. The more money a drugmaker gives them, the better placement their drug gets. It’s not about effectiveness. It’s not about safety. It’s about who paid the most.

Why Your Generic Is in Tier 2 (Or Higher)

Let’s say you take levothyroxine, a common thyroid medication. There are dozens of generic versions made by different companies. Your plan might list one brand - say, Teva - as Tier 1 with a $5 copay. Another version - say, Mylan - is Tier 3 with a $45 copay. Both contain the exact same active ingredient. Both work the same way. But one is cheaper for your plan because Teva gave the PBM a bigger rebate.

This isn’t rare. In 2024, Express Scripts moved 87 generic drugs to higher tiers after their rebate deals expired. UnitedHealthcare shifted some high-volume generics like atorvastatin to $0 copays, but moved less common ones to $10. That means your doctor prescribes the same drug, but depending on which pharmacy fills it - or which generic is available - your out-of-pocket cost can jump by hundreds of dollars a month.

The same thing happens with specialty generics. Drugs like adalimumab (a biosimilar for rheumatoid arthritis) are technically generic versions of biologics. But because they cost $5,000 to $10,000 per month, they’re often placed in Tier 4 or 5. Even if you’re on a generic, you might pay 30% coinsurance - meaning you fork over $1,500 to $3,000 per month.

Generics Aren’t Always the Cheapest Option

You might assume that if a drug is generic, it’s automatically the cheapest choice. That’s not true. Some brand-name drugs are in lower tiers than their generic counterparts. Why? Because the brand-name drug has a better rebate deal.

For example, a brand-name blood pressure pill might be in Tier 2 with a $30 copay. A generic version of the same drug might be in Tier 3 with a $60 copay. The brand is cheaper to you - even though it’s more expensive to the system overall. This is counterintuitive, but it’s standard practice. PBMs want to steer patients toward drugs that give them the biggest cut, not the ones that are clinically superior.

A 2023 Patient Advocate Foundation survey found that 41% of insured adults had experienced a generic drug with a higher copay than expected. And 68% said they couldn’t get a clear explanation from their insurer.

What You Can Do

You don’t have to accept this. There are ways to fight back.

• Check your formulary - every plan updates its drug list once a year, usually in October. Log into your insurer’s website or call them. Ask for the current tier list. Look up your drug by name, not just by category.
• Ask your pharmacist - pharmacists often know which generic versions are cheaper. If you’re handed a pill with a high copay, ask: "Is there another version of this drug that’s in a lower tier?" They can sometimes switch it without a new prescription.
• Request a therapeutic interchange - this is a formal request from your doctor to switch you to a preferred drug. Your doctor fills out a form, and your insurer approves it 63% of the time. It’s not a guarantee, but it’s worth trying.
• Use cost tools - apps like GoodRx and SmithRx show you real-time prices at nearby pharmacies. Sometimes, paying cash is cheaper than using insurance.
• Look into manufacturer assistance - many drugmakers offer coupons or patient assistance programs. In 2023, these covered 22% of specialty drug costs for eligible patients.

Why This System Persists

You might wonder: why hasn’t this been fixed? The answer is money. Tiered copays save insurers billions. According to a 2005 study, adding a third tier for non-preferred brands cut demand for those drugs by over 15%. That means fewer claims, lower overall spending.

But there’s a cost - to patients. A 2005 study found that when diabetes drugs moved from Tier 2 to Tier 3, adherence dropped by 7.3%. People skipped doses because they couldn’t afford them. That leads to hospital visits, emergency care, and higher long-term costs.

The system works for PBMs and insurers. It doesn’t always work for you.

What’s Changing in 2025 and Beyond

Starting in 2025, Medicare Part D will cap out-of-pocket drug costs at $2,000 per year. That’s a big deal. It won’t eliminate tiered copays, but it will limit how much you pay - no matter how high the tier.

Some lawmakers are pushing bills to ban tiering of generics altogether. The bipartisan Prescription Drug Pricing Reduction Act would require all generics of the same drug to be in the same tier. That would end the practice of charging more for chemically identical pills.

But for now, the system stays. And if you’re paying more for a generic than you expected, it’s not you - it’s the contract between the drugmaker and the PBM.

Bottom Line

Your generic drug isn’t expensive because it’s inferior. It’s expensive because someone else got paid to make it that way. The system is designed to save money - but not always for you.

The key is to know your plan, ask questions, and don’t assume anything. Just because a drug is generic doesn’t mean it’s cheap. And just because it’s cheaper doesn’t mean it’s better.

Stay informed. Stay proactive. And if your copay jumps for no clinical reason - push back. You have more power than you think.