Why Do Your Prescription Prices Increase In January?

It’s bad enough that January is cold, wet, and usually when all those holiday credit card bills arrive. Then you go to the pharmacy and discover your regular prescription mysteriously costs more than it did a month ago.

What gives? And what, if anything, can you do about it?

Drug prices are high, but…

In January 2019, pharmaceutical companies did raise prices on hundreds of prescription medications, with an average increase of 6.3%. By July 2019 increases had affected more than 3,000 drugs and the average rate of increase was more than 10%.

Yet in 2017, drug prices actually decreased slightly, after increasing almost 12% in 2014-15. And throughout that rollercoaster ride, the percentage of overall health care spending that went to prescription drugs remained mostly steady.

Long story short, while prescriptions are expensive, prescription pricing is complex, with lots of players and factors at work.

So why January? Honestly, there’s nothing particularly special about January when it comes to setting individual drug prices. As in 2019, price changes are announced at any time during the year.

However, most medical and prescription insurance plans have calendar-based plan years. So your prescription drug coverage may hold the reason why you notice cost changes at the beginning of the year.

Did your deductible reset?

Does your health plan require you to meet an annual deductible for prescriptions (that may or may not be included with a medical deductible)? If so, that deductible starts over, or resets, beginning January 1.

If you’ve met the deductible during 2019 and were used to paying coinsurance, it can feel like a big price increase in January when you have to start paying the full price again (until you reach the deductible for 2020).

Did you change medical plans?

Whether your health plan has open enrollment early in October or during the holiday months, by January you may have long forgotten that you changed to a plan that covers prescriptions differently.

If your 2019 plan had a $10 copay for generic drugs but your new plan has a prescription deductible, you could be in for a bad case of sticker shock come January.

Did your current medical plan change?

Same plan, same generic drug, but in December it cost $5 and in January my price is $20?!

Sometimes, a health plan will change its prescription coverage from year to year. Your plan sponsor (for example, your employer) is required to tell you about plan changes before you enroll—but changes to prescription coverage are infrequent and often overlooked by employees.

Did your plan’s formulary change?

The formulary is the list of approved drugs your plan covers.

Drugs on the formulary are classified into different categories, or “tiers.” Which tier a drug is assigned to determines how much the plan will pay for that medication.

The lowest tier is generally made up of generic drugs. The higher tiers typically consist of “preferred” brand name drugs, then “non-preferred” brand name, then specialty medications, etc.

A number of factors can result in drugs being reclassified into a different tier and that can significantly affect your cost, depending on how your plan covers different tiers. And some drugs may be dropped from the formulary—which could mean they’re not covered at all.

Keep in mind, formularies can change at any time (not just in January) so check your plan’s formulary often. (You can usually find it on your plan’s or your company’s benefits websites.)

What you can do about it

Whether or not your prescription cost changes in January, there is something you can do to ensure you’re paying the lowest price for your medications all year long.

As you know, each time you use your insurance to purchase prescriptions, your plan determines how much you’ll pay.

Yet a prescription’s actual price often can vary wildly between pharmacies in the same town and even in the same chain. Include available discounts, and it’s not unusual to see a difference of hundreds of dollars on a single prescription.

That’s why before you whip out that insurance card at the pharmacy, your first step should always be to check the price on RxSaver. Just enter your medication and ZIP Code and you may discover you can pay much less by NOT using your insurance.

There are lots of complex factors affecting our prescription costs and why they change. But by understanding the way our coverage works and checking for the lowest price available, we can eliminate some of the mystery and feel less victimized by forces that seem out of our control.