William Tiep takes numerous medications for several chronic conditions, including diabetes, high blood pressure, and high cholesterol. Come August, the 75-year-old from Toledo, Ohio, will reach the “donut hole,” the point at which he and his Medicare Part D prescription drug plan together have spent $3,310 on medications, and he will have to pay a larger share of the drug costs. “That’s when I start to shop around for discounts,” says Tiep.

Many drugstores offer savings programs for people who pay for prescription medications out of pocket; in some cases, the pharmacy discount price is cheaper than the insurance co-pay. Several of the medications Tiep takes are older generic medications, which discount programs price at $4 for a month’s worth or $10 for a 90-day supply—and sometimes even less. For example, Kmart’s Pharmacy Savings Plus program sells several commonly prescribed generics for $3 per month, while Sam’s Club offers a few prescription medications free to members of the Sam’s Plus program if you don't use your insurance. 

“I worked it out,” says Tiep. “Once I hit the donut hole, for most of the drugs I take, it’s cheaper not to go through insurance and just find a good discount.”

But that can get confusing. In fact, when we contacted several retail drugstore chains, we found if you get your health insurance through Medicare, some chains won’t tell you about the pharmacy discount—or won’t let you use them at all. (That's sometimes also the case with Medicaid and Tricare insurance as well.)

Accessing 'Secret' Discounts

Why exclude seniors with Medicare from drugstore discounts for their medications? One issue is a broadly worded Social Security statute that prohibits physicians, pharmacies, and healthcare providers from offering valuable giveaways to entice Medicare and Medicaid patients. The agency’s reasoning is that those promotions could possibly give unfair advantage to large providers over those with fewer resources, as well as encourage bait-and-switch tactics, where providers offset the costs of freebies with unnecessary or lower-quality goods and services.

To Walgreens, that law means it can’t offer discounts for people with Medicare. A spokesperson for Walgreens told Consumer Reports that customers with Medicare are ineligible to participate in the company’s Prescription Savings Club because of “lack of clear guidance from the federal government about the application of federal laws prohibiting healthcare providers (including Walgreens) from offering items of value, which could include discounts, to Medicare and Medicaid beneficiaries.”

Yet, the Centers for Medicare and Medicaid Services (CMS) says if you have Part D, you still have a choice. A CMS spokesperson told us that “a Medicare beneficiary does have a right to purchase a drug outside of a prescription drug plan at his or her discretion.”

What could be confusing to a consumer with Medicare is that, CMS’ rules require a pharmacist to automatically use your drug Part D insurance unless you specifically say not to.

Bottom line: We found that, with the exception of Walgreens, most drugstores will let people with Medicare use their discount program, but you'll have to ask.

Pharmacy discount. Image of woman talking to pharmacist.

When to Shop for a Pharmacy Discount

The advice to shop for discounts comes with two important caveats.

CMS told us that the agency encourages people with Part D prescription drug benefit to use their insurance for three, practical reasons. First, it provides a more complete record of all the medications you take that can easily be checked for potentially dangerous drug interactions.

Second, the amount you spend is only applied toward your deductible and out of pocket costs if you go through your insurance. That’s especially important if you expect to reach the other side of the donut hole by spending a total $4,850 for the year. At that point catastrophic coverage kicks in and your costs go way down.

In addition, insurance companies negotiate cheaper prices for their customers. So most of the time, using your insurance is likely to net you the lowest price. But if you find yourself in one of the following situations, it makes sense to check costs through a pharmacy discount program:

  • You are unlikely to meet your annual deductible. For example, if you take three older generic medications that you can purchase through a pharmacy discount program for $10 each for a 90-day supply, your total cost for the year would be about $120 for all three drugs. If your plan deductible is more than that, it may make sense to skip insurance and pay out of pocket.
  • You hit the donut hole. If you reach the gap and are unlikely to spend enough for catastrophic coverage to kick in, consider following Tiep’s example and shop for discounts. (There will be less need to do that in coming years as the portion patients are required to pay in the donut hole will shrink every year until the gap closes in 2020.)
  • Your drug coverage changes. If your insurance plan reduces coverage for a medication you take—or drops it altogether—and there’s not a good alternative, a pharmacy discount can make the drug more affordable. 

When comparing costs, remember to factor in any fees associated with joining a discount program. For example, Kmart charges an annual fee of $10 per person, or $15 for a household, to join their Savings Plus program.

Other Ways to Save On Medicare Drug Costs

If you have Medicare and are unable to afford your medications, there are several options to help lower your prescription drug costs.

  • See whether you qualify for the government’s Extra Help program. If you meet income or other requirements, your plan premiums and deductibles will be reduced and you’ll pay no more than $2.95 for each generic and $7.40 for each name-brand covered drug.
  • If you don’t qualify for the Extra Help program your state may have programs that can help. Find your state health insurance assistance program (SHIP) through the SHIP National Technical Assistance Center at www.shiptacenter.org.
  • Talk to your doctor. If you are taking a name-brand medication, ask whether there’s a generic version, which could save you up to 90 percent on the cost of the drug. If there’s no generic, ask if there’s an alternative from the same class of drugs that costs less.
  • Shop by mail. Many prescription drug plans offer discounts for customers who fill prescriptions through specified mail-order pharmacies. But be sure to check prices because ordering by mail doesn’t always save money.
  • Apply for a price break. Some pharmaceutical companies offer assistance programs for the drugs they sell. For example, if you are enrolled in a Medicare Part D plan, have spent at least $600 on your medications this year, and meet income eligibility requirements, you might qualify to get certain GlaxoSmithKline medications at no charge. Check http://www.medicare.gov for a list of pharmaceutical assistance plans or contact the company that makes your medication.
  • Find a better drug plan. Use the Medicare Plan Finder to compare the costs of your medications on different Part D and Medicare Advantage Plans. If you find a plan with lower costs, you can switch during open enrollment, which starts on October 15, 2016. 

Editor's Note: This article and related materials are made possible by a grant from the state Attorney General Consumer and Prescriber Education Grant Program, which is funded by the multistate settlement of consumer-fraud claims regarding the marketing of the prescription drug Neurontin (gabapentin).