Why Are the Prices of My Medications Changing?

If you have Medicare and purchased a stand-alone Part D Prescription Drug plan, you may see the costs of your medications fluctuate during the year depending on your out-of-pocket costs. This is because of the different phases you could possibly go through with a prescription drug plan. Read further to understand each phase and where you may currently be.


The first phase of a prescription drug plan is the deductible phase. Most prescription drug plans have a deductible, but you may come across some that do not. For 2022, no plan is allowed to have a deductible amount listed over $480. To know if your plan has a deductible or not, you may refer to the Summary of Benefits that was mailed to you upon enrolling in the plan, or if you have had your current prescription drug plan for more than a year, you will need to refer to the Annual Notice of Changes that is mailed to you in early fall. Keep in mind that prescription drug plans change every year, so if your plan did not have a deductible when you enrolled, it is possible that it may have one the next year.

If your plan does have a deductible, you will pay out-of-pocket the full price of your medications until the deductible amount is met. Once it is met, the cost of your medications will typically go down as you move into the next prescription drug plan phase.


Once the deductible has been met, you will entering the Initial coverage phase of a prescription drug plan. In this phase, the company whom you have your plan through has determined the set copayments or coinsurance according to each tier. Tiers are how they categories different medications. Every medication that is covered is broken down into a tier. Below are the standard categories for each tier.

Tier 1 – Preferred generic

Tier 2 - Generic

Tier 3 – Preferred brand

Tier 4 – Non-preferred drug

Tier 5 – Specialty

Coverage Gap

The coverage gap, also referred to as the “donut hole” comes into the equation when your out-of-pocket costs reach $4,430 (2022). During this phase, you will pay 25% of the full price of your medications instead of paying a set copayment or coinsurance determined by the insurance company you choose. The Coverage Gap phase is less common, but it all depends on the full price of your medications. Even though you paid a copayment in the Initial coverage phase for your medications, the full amount (what you are paying plus what the insurance company is paying) is actually what determines the phases you go into.

Catastrophic Coverage

The last stage of a prescription drug plan is the Catastrophic Coverage phase. Individuals enter this phase when their total out-of-pocket costs reach $7,050 (2022). During this phase, your copayment or coinsurance for medications is determined by Medicare and does lower in price. For 2022, beneficiaries pay either 5% of the full cost of the covered medication on any tier, or a $3.95 copayment for generic medications (including brand medications that are treated as generic) and a $9.85 copayment for all other medications – whichever is greater. These amounts are subject to change each year as well. Historically, fewer people enter the Catastrophic Coverage phase as compared to others.

Important Takeaway for Prescription Drug Plans

Several times it is mentioned that the prices related to a prescription drug plan change each year. This may sound intimidating, but at MWG Direct, we review our client’s prescription drug plans each year free of charge. This is an added benefit we provide to each of our Medicare Supplement clients. We do this to ensure that you are on the most cost-effective plan for the upcoming year and to verify that all of your medications will be covered. Remember that the deadline to switch your prescription drug plan is October 15th through December 7th every year. If you would like to utilize our free services, give us a call at (877) 759-5762, option 2 or email us at direct@morganwhite.com.

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