There are some people that don't understand the differences between the negotiated prices of prescription medications and the retail prices of those same medicines. When a Medicare beneficiary enrolls into a Part D prescription drug plan, they are entitled to certain prices and privileges. There are some that don't understand the benefits that are given when people have a Medicare part D prescription drug plan.
What are negotiated prices of medications?
When a person enrolls in a part D prescription drug plan, they sign a contract with that insurance provider to get certain benefits. The biggest benefit most members sign up for is the pricing of their medications. The insurance company is willing to provide their members with certain medication pricing in return for their premiums each month.
The prices that an insurance provider has listed for those medications are negotiated prices. They have made arrangements with the medication manufacturer to have those medications at a certain price. When a person enrolls into a particular Medicare part D plan, they are essentially signing a contract to keep their medications at that negotiated price.
What are retail prices of medications?
When a person doesn't have insurance, it doesn't mean they aren't able to receive medications. It means they don't have a contract with an insurer nor do they have access to the negotiated prices of the medications their doctor has prescribed for them. Instead of paying a negotiated price, they will have to pay a retail price.
The retail price of the medication is the price that is set by the pharmacy. These medications are priced so that the store makes a profit from the sale of that medication. There is no negotiation, no changing the price. The price is set and those that don't have insurance are expected to pay what is requested for that medication.
What's the difference?
When a person has insurance, the cost of their medication has been negotiated to a lower price than many retailers offer. These prices are negotiated by the insurance providers and often it is less than the national average of medications. This is something that makes a huge difference when a person is prescribed a brand named medication. These medications are often more expensive than people expect them to be.
The retail prices of medications are not negotiated. As pharmacies purchase medications, they look at their costs and price the medication so they are making a profit. There is no one to say the price is too much or lower the price.
There are many people that don't understand this concept. If a medication costs $300 for a one month supply for a patient without Medicare part D insurance, that patient will be paying a total of $3600 a year for that one medication. For that same person with part D insurance, their negotiated price may be $100 per month, $1200 per year. The difference between $3600 and $1200 dollars is a huge difference. This is something that happens every day in pharmacies around the country to those that don't have insurance. The difference in pricing is staggering when a person takes multiple medications each day and they don’t have insurance.
As people think about their out of pocket expenses, they sometimes think they would be better off without having their Medicare part D insurance. With the staggering differences between negotiated pricing and retail pricing, that isn't the best financial decision a person can make. As people look at the money they are saving, they are often very happy to keep the insurance they have.
Although Medicare part D insurance is something that can be hard to understand, saving thousands of dollars of year isn't hard to understand. Negotiated prices were designed to help beneficiaries to keep as much of their income in their homes as possible. Retail prices were designed to make a profit for the store that is selling it. The difference shouldn't be ignored.