When you pick up a prescription at the pharmacy, you might not think about why one drug costs $10 and another costs $75-even if they treat the same condition. The answer lies in something most employees never see: your employer’s formulary. It’s a hidden list that decides which medications your health plan covers, and how much you pay for them. And right now, it’s heavily stacked in favor of generic drugs.
Why Your Plan Pushes Generics
Generic medications aren’t just cheaper-they’re just as safe and effective. The FDA confirms that generics must meet the same strict standards as brand-name drugs. The only real difference? Price. Generics cost 80-85% less because their makers don’t have to repeat expensive clinical trials or run national ad campaigns. That’s why your employer’s health plan wants you to use them.It’s not just about saving the company money. It’s about saving you money too. According to Schauer Group, generic drugs save the U.S. healthcare system over $150 billion every year. That’s $3 billion per week. For employers, that’s a huge win. For employees, it should be too-but it doesn’t always work out that way.
How Tiered Formularies Work
Most employer plans use a tiered system to organize drugs by cost. Think of it like a pricing ladder:- Tier 1: Generics - Usually $10 or less per prescription. This is where your plan wants you to be.
- Tier 2: Preferred Brand-Name Drugs - About $40. These are brand-name drugs your plan has negotiated a deal on.
- Tier 3: Non-Preferred Brand-Name Drugs - Around $75. These are brand-name drugs your plan doesn’t favor-often because a generic is available.
- Tier 4: Specialty Drugs - Hundreds or even thousands of dollars. These are for complex conditions like cancer, MS, or rheumatoid arthritis.
Here’s the catch: if a brand-name drug becomes available as a generic, your plan will automatically move the brand version to Tier 4. That means if you keep taking the brand, your copay jumps from $40 to $75-or even higher. Meanwhile, the generic sits in Tier 1 with a $10 copay. The system is designed to nudge you toward the cheaper option.
Who Controls the List?
You might think your employer decides which drugs are covered. But they don’t. It’s the Pharmacy Benefit Managers-PBMs. These are the middlemen between drugmakers, insurers, and pharmacies. The big three-OptumRx, CVS Caremark, and Express Scripts-control access to prescription drugs for the majority of U.S. employees.These companies don’t just set prices. They decide which drugs get on the formulary at all. In January 2024, each of the three PBMs removed over 600 drugs from their lists. That’s more than 1,800 medications suddenly not covered. Why? To pressure drugmakers into offering bigger discounts. It’s a high-stakes negotiation-and you’re on the receiving end.
When a drug gets kicked off the formulary, you might lose access unless your doctor files a medical exception. That’s a paperwork-heavy process that can delay your treatment. And even if you get approval, you might still pay more than you did before.
Why You’re Not Seeing the Savings
Here’s the real problem: the money saved isn’t always going to you.PBMs use a system called gross-to-net pricing. A drug might have a list price of $100, but after rebates and discounts, the PBM pays only $45. That 55% gap? That’s the rebate. The drugmaker pays the PBM to keep their drug on the formulary. But you don’t see that discount at the pharmacy counter. You still pay your copay-$10 for the generic, $75 for the brand-even though the PBM pocketed most of the savings.
That’s why Scott Glovsky and others call it a broken system. The savings are real-but they’re going to insurers and PBMs, not to employees. You’re being asked to switch to a cheaper drug, but you’re not getting the full benefit of the price drop.
What You Can Do About It
You can’t change your employer’s plan. But you can understand it-and use it to your advantage.- Check your formulary. Go to your insurer’s website. Look for “Drug List,” “Formulary,” or “Preferred Drug List.” Don’t assume your current meds are still covered.
- Ask about generics. If your doctor prescribes a brand-name drug, ask: “Is there a generic version?” Most of the time, there is. And it’s just as effective.
- Use in-network pharmacies. Some plans, like HealthOptions.org’s Price Assure Program, automatically lower costs for generics filled at network pharmacies. Don’t just go to the closest one-check which ones are in-network.
- Know your tier. If your copay suddenly jumped, it’s likely because your drug moved tiers. Look up the reason. It might be because a generic just came out.
- Request exceptions if needed. If your medication was removed from the formulary and you can’t switch, your doctor can file a medical exception. Don’t give up-many are approved.
What Happens If You Ignore It?
Ignoring your formulary can cost you hundreds-or even thousands-of dollars a year. Let’s say you take a brand-name blood pressure med that costs $75 per month. A generic version exists and costs $10. You stick with the brand. That’s $65 extra per month. Over a year? $780. That’s not a small amount. And if your plan changes again next year? It could be worse.People with chronic conditions-diabetes, asthma, heart disease-are especially vulnerable. A 2023 study found that nearly 1 in 5 Americans with chronic illness skipped doses or cut pills because they couldn’t afford them. You don’t have to be one of them.
What Employers Are Doing
Forward-thinking employers are starting to help. They’re sending emails with simple comparisons: “Your brand-name asthma inhaler costs $120. The generic costs $15. Same results.” They’re putting info in pay stubs. They’re partnering with care managers who help employees find affordable alternatives.Some are moving toward Consumer-Driven Health Plans (CDHPs), which give employees more control-but only if they’re educated. As Schauer Group points out: “Many employees are willing to use generics-they just don’t know enough about them.”
That’s the gap. The system is built to save money. But unless employees understand how it works, they’re left confused, frustrated, and overpaying.
Final Reality Check
Your employer’s health plan isn’t out to get you. It’s trying to control rising drug costs. But the way it’s set up-through opaque PBMs, hidden rebates, and shifting formularies-makes it hard for you to benefit.The truth? Generic drugs work. They’re safe. And they’re dramatically cheaper. You just need to know how to find them and when to ask for them.
Next time you get a prescription, don’t just accept the first option. Ask: Is there a generic? Check your plan’s formulary. Call your insurer. You might save hundreds this year-and every year after that.
Are generic drugs really as good as brand-name drugs?
Yes. The FDA requires generic drugs to have the same active ingredients, strength, dosage form, and route of administration as the brand-name version. They must also be bioequivalent-meaning they work the same way in your body. The only differences are in inactive ingredients (like fillers) and packaging. Generics are not "weaker" or "inferior." They’re the same medicine, just cheaper.
Why does my copay keep changing for the same medication?
Your plan’s formulary changes often. When a brand-name drug gets a generic version, the brand is usually moved to a higher tier (like Tier 4), and the generic is placed in Tier 1. That means your copay jumps if you keep taking the brand. These changes can happen at any time-sometimes without notice. Always check your formulary before filling a prescription.
What if my medication was removed from the formulary?
If your drug is no longer covered, you have a few options. First, ask your doctor if there’s a similar drug still on the formulary. If not, your doctor can file a medical exception request with your insurer. Many of these are approved, especially if you’ve been on the drug for a long time or switching would harm your health. Don’t stop taking your medication-reach out to your plan immediately.
Do PBMs pass savings on to employees?
Not usually. PBMs negotiate rebates from drugmakers, but those savings rarely lower your out-of-pocket cost. Instead, the rebate goes to the insurer or PBM. That’s why a $100 drug might have a $75 rebate, but you still pay your $40 copay. The system is designed to save money for the plan-not necessarily to lower your bill.
How can I find out what drugs my plan covers?
Log in to your health insurer’s website and look for “Drug List,” “Formulary,” or “Prescription Coverage.” You can also check your Summary of Benefits and Coverage (SBC), which your employer is required to give you. If you’re unsure, call the number on your insurance card and ask for the current formulary. Don’t rely on memory-formularies change frequently.
Should I always choose the generic?
In most cases, yes. For over 90% of medications, generics are the best choice-same effectiveness, lower cost. But there are exceptions. Some people react differently to inactive ingredients in generics. If you’ve had issues switching before, tell your doctor. They can help determine if a brand-name drug is truly necessary for you.
nikki yamashita
December 11, 2025 AT 21:42Just switched my blood pressure med to generic last month-$780 saved this year. I didn’t even know I could do that until I read this. Thanks for the clarity!
Adam Everitt
December 12, 2025 AT 13:21so like… pbms are just middlemen who take the money and run? i mean… kinda wild. like why do we even have em? they dont make drugs, they just… move em? and we pay for it? lol
Reshma Sinha
December 14, 2025 AT 12:02From a clinical pharmacy perspective, tiered formularies are a cost-containment lever aligned with value-based care principles. The key is ensuring therapeutic equivalence isn't compromised during formulary transitions-especially for narrow-therapeutic-index drugs. Always verify bioequivalence data before switching.
Lawrence Armstrong
December 14, 2025 AT 17:08Yep. Just checked my formulary today. My asthma inhaler moved to Tier 4. 😩 Generic’s $15. I’m switching. Also-use GoodRx. It sometimes beats your copay. 🙌
Levi Cooper
December 15, 2025 AT 12:28Why are we letting corporations dictate our healthcare? This isn’t freedom. This is corporate feudalism. You think you’re saving money? You’re just being manipulated into accepting less. The system is rigged.