Tiered Copays: Why Your Generic Medication Might Cost More Than Expected

You picked up your prescription for generic levothyroxine-the same drug you’ve taken for years-and the pharmacy charged you $45. Last month, it was $5. You didn’t change anything. Your doctor says all generics are the same. So why the spike?

This isn’t a mistake. It’s the system.

Most health plans in the U.S. use something called tiered copays. Instead of charging the same amount for every drug, they sort medications into levels-tiers-and each tier has its own price tag. Tier 1 is cheap. Tier 5 is expensive. And here’s the twist: not all generic drugs are in Tier 1. Some generics, even if they’re chemically identical to cheaper versions, sit in higher tiers with much steeper copays.

How Tiered Copays Actually Work

Think of your drug plan like a grocery store with price labels that change based on who the supplier is, not what’s inside the box.

Tier 1: Preferred generics. These are the cheapest-usually $0 to $15 for a 30-day supply. Common drugs like lisinopril, metformin, or atorvastatin often land here because the manufacturer gave the pharmacy benefit manager (PBM) a big discount.

Tier 2: Non-preferred generics. Same active ingredient. Same effect. But this version? It’s $15 to $30. Why? Because the company that makes it didn’t offer the PBM a good enough rebate. It’s not about quality. It’s about money.

Tier 3: Preferred brand-name drugs. These cost more-$25 to $50. You might see them if your doctor prescribes a brand version that’s still under patent.

Tier 4 and 5: Specialty drugs. These are for complex conditions like rheumatoid arthritis, multiple sclerosis, or cancer. Even if they’re generic versions of biologics (like adalimumab), they can cost you 20-40% of the total price. A single month’s supply might be $5,000. Your share? $1,000 to $2,000.

According to data from Medicare Part D and employer plans in 2024, nearly all plans use this system. And it’s not going away. The Inflation Reduction Act caps your annual out-of-pocket drug costs at $2,000 starting in 2025-but it doesn’t change how drugs are tiered. You still pay more for some generics.

Why Your Generic Isn’t in Tier 1

Here’s the truth: your generic drug isn’t in Tier 1 because it’s better. It’s in Tier 1 because the manufacturer paid the PBM to put it there.

Pharmacy Benefit Managers-like CVS Caremark, Express Scripts, and OptumRx-negotiate rebates with drugmakers. The bigger the rebate, the lower the tier. If your generic drug’s maker didn’t offer a big enough discount, it gets bumped up. Even if it’s identical to the one in Tier 1.

Studies show that 68% of generic drugs moved to higher tiers in recent years were due to expiring rebate deals-not clinical reasons. A 2023 analysis by BOC Pharmacy Group found that 12-18% of generic medications are classified as specialty drugs (Tiers 4-5) simply because they’re expensive to make, store, or ship-even if they’re not complex biologics.

Patients don’t know this. They assume “generic” means “cheapest.” But that’s not how it works. Two pills with the exact same chemical formula can cost $10 apart because of a contract between two corporations.

The Real Impact on Patients

When a drug moves from Tier 1 to Tier 3, people stop taking it.

A 2005 study found that when diabetes medications shifted from Tier 2 to Tier 3, adherence dropped by 7.3%. That’s not a small number. It means people skipped doses, delayed refills, or went without-because they couldn’t afford it.

And it’s happening right now. In a 2023 survey by the Patient Advocate Foundation, 41% of insured adults said they’d been hit with a higher-than-expected copay for a generic drug. Two-thirds of them couldn’t get a clear answer from their insurer.

Reddit threads are full of stories like this: “My levothyroxine went from $5 to $45. My doctor says it’s the same. Why?”

Pharmacists sometimes swap your prescription automatically for the “preferred” generic. But if you’re used to one brand of generic and your body reacts differently-even slightly-you might feel off. Fatigue. Mood swings. Weight changes. These aren’t always reported. They’re just blamed on “aging” or “stress.”

Specialty generics are even worse. A patient on a generic version of adalimumab (a biologic for autoimmune disease) might pay $1,200 a month. That’s not a copay. That’s coinsurance. And if you miss a payment? Your treatment stops. Your condition flares. Your life gets harder.

What You Can Do About It

You’re not powerless. There are steps you can take.

1. Check your plan’s formulary. Every year in October, Medicare plans update their drug lists. Employer plans often do too. Log in to your insurer’s website. Search for your drug. Look for the tier. If it’s higher than expected, note the name of the specific generic version they’re covering.

2. Ask your pharmacist. They know which generics are in which tier. Ask: “Is there a different generic version of this drug that’s cheaper?” Sometimes, the same drug from a different manufacturer is in Tier 1. Just because it’s labeled “generic” doesn’t mean it’s the same product.

3. Request a therapeutic interchange. Ask your doctor to fill out a form asking your insurer to cover a lower-tier version. This isn’t a hassle. In 2024, 63% of these requests were approved.

4. Use tools like GoodRx or SmithRx. These sites show you cash prices and compare copays across tiers. You might find that paying cash for your generic is cheaper than your copay. That’s not rare.

5. Look into manufacturer assistance programs. Many drugmakers offer coupons or free medication programs for low-income patients. Even for generics. You’d be surprised how many people don’t know this exists.

What’s Changing in 2025 and Beyond

The system isn’t static. UnitedHealthcare started putting high-volume generics like atorvastatin and lisinopril into $0 copay tiers in early 2024. That’s good news-for those drugs. But they moved 87 other generics to higher tiers to balance the cost.

Express Scripts did the same. Rebates are falling. PBMs are scrambling. They’re moving more generics to higher tiers, especially those used less frequently.

Future trends? More biosimilars-generic versions of biologics-will be sorted into tiers. You’ll have multiple versions of the same drug, each with a different price. More confusion. More cost surprises.

Legislation like the Prescription Drug Pricing Reduction Act could force PBMs to justify tier placements with clinical data. But that’s still years away.

For now, the system stays. And it’s designed to make you pay more for some generics-not because they’re worse, but because the company that makes them didn’t pay enough to the middleman.

Bottom Line

Your generic drug isn’t expensive because it’s special. It’s expensive because of a contract you never saw. A deal between a drugmaker and a PBM. A deal that doesn’t care if you can afford it.

But you can fight back. Know your plan. Ask questions. Compare options. Don’t assume “generic” means “cheap.” It doesn’t. And if you’re paying more than you should, you’re not alone. Millions are. But you’re the only one who can fix it-for yourself.