Out-of-Pocket Costs: What Patients Pay for Generics vs Brand-Name Drugs

When you pick up a prescription, the price on the receipt can feel random. One month, your generic blood pressure pill costs $4. The next, it’s $18. Meanwhile, your neighbor’s brand-name version of the same drug is only $12. Why? It’s not about quality. It’s not about effectiveness. It’s about how the system is built-and who’s paying for it.

Generics aren’t cheaper because they’re worse

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 prove they work the same way in the body. That’s not a guess. It’s science. So if your doctor prescribes lisinopril and you get the generic, you’re getting the exact same medicine your body needs. The only differences? The shape, color, or filler ingredients-things that don’t affect how the drug works.

Yet, generics cost 80 to 85% less than their brand-name equivalents. In the U.S., about 90% of all prescriptions filled are for generics. But here’s the twist: even though they make up most of the prescriptions, they only account for about 18% of total drug spending. That’s because brand-name drugs, though rarely prescribed, are priced so high they drag up the total cost.

Insurance design decides what you pay

Your out-of-pocket cost doesn’t just depend on the drug’s list price. It depends on your insurance plan. There are three main ways plans charge you:

• Copay: A flat fee, like $5 or $15, no matter what the drug costs.
• Coinsurance: A percentage of the drug’s price, like 20%.
• Deductible: You pay 100% until you hit a certain amount.

If you’re on a copay plan, your price won’t change even if the drug’s list price jumps 20%. But if you’re on coinsurance or have a high deductible, every price hike hits you directly. A 2021 study found that for patients with coinsurance, median list prices for brand-name drugs rose 16.7% over two years-and so did their out-of-pocket costs. Meanwhile, people with fixed copays saw no change.

The Medicare Part D trap

Medicare Part D has a strange loophole that makes some generics cost more than brand-name drugs. It’s called the “donut hole,” or coverage gap.

Here’s how it works: Once you and your plan have spent a certain amount on drugs, you enter the gap. You pay a higher share until you hit the catastrophic coverage threshold. At that point, you only pay 5% of the drug’s cost.

But here’s the catch: Brand-name drug manufacturers are required to give a discount during the gap-and that discount counts toward your out-of-pocket spending. Generic manufacturers? They don’t have to. So if you’re taking a high-priced generic, you have to spend way more before you reach catastrophic coverage.

In 2019, a brand-name drug user needed to spend $982 to get out of the gap. A generic drug user? $3,730. That’s nearly four times more. Even though the generic cost less per pill, the system made you pay more to get the same relief.

When paying cash beats insurance

You might think insurance always saves you money. But for generics, that’s not always true.

A 2024 study found that 11.8% of generic prescriptions cost less when paid in cash through services like Mark Cuban Cost Plus Drug Company. On average, people saved $4.96 per prescription. For uninsured patients, the savings were even bigger. Medicaid patients didn’t save much-because their plans already had low copays.

Why? Because insurance pricing is hidden. Pharmacies and pharmacy benefit managers (PBMs) negotiate secret deals. The price you see on your bill isn’t the real cost. It’s a middleman’s markup. Cash-only pharmacies cut out the middlemen. They charge a transparent cost plus a small fee. No rebates. No hidden contracts. Just the real price.

In 2020, only 4% of U.S. prescriptions were paid in cash. But 97% of those cash payments were for generics. That tells you something: people are figuring out how to game the system.

Doctors can block generics-even if you want them

Your doctor can write “dispense as written” or “do not substitute” on your prescription. That means the pharmacist can’t give you the generic, even if it’s cheaper. Sometimes, this is medically necessary. Other times, it’s just habit-or because the drug company paid the doctor to promote the brand.

If you’re on a high-deductible plan and your doctor prescribes a brand-name drug, ask: “Is there a generic?” If they say no, ask why. If they can’t give you a clear medical reason, you might be paying more than you need to.

Why the system is broken

The U.S. spends $350 billion a year on prescription drugs. Generics saved $338 billion in 2020 alone. That’s more than the entire annual budget of many states.

But the savings aren’t reaching patients. Why? Because the system rewards complexity. PBMs and insurers profit from opaque pricing. Drug manufacturers raise list prices to boost rebates-rebates that go to insurers, not patients. The result? Patients pay more for the same medicine, even when generics are available.

Dr. Stacie Dusetzina from Vanderbilt University put it simply: “The system makes brand-name drugs cheaper to use than generics-not because they’re better, but because of how the rules are written.”

What you can do right now

You don’t have to accept whatever price you’re given. Here’s what works:

1. Always ask if a generic is available-even if your doctor prescribes a brand.
2. Check GoodRx or Cost Plus Drug Company before filling your prescription. Sometimes, cash price beats insurance.
3. If you’re on Medicare Part D and take high-cost generics, track your out-of-pocket spending. You might be stuck in the donut hole longer than you need to be.
4. Call your pharmacy. Ask: “What’s the cash price?” Then ask: “What’s my copay?” Compare.
5. If you’re paying more than $20 for a common generic like metoprolol or omeprazole, you’re likely being overcharged.

Generics are safe. The system isn’t.

There’s no reason to fear generics. They’re not second-rate. They’re not less effective. They’re the same medicine, sold at a fraction of the price.

The problem isn’t the drug. It’s the system that lets middlemen profit from confusion. The same pill can cost $3 one day and $25 the next-not because it changed, but because the rules did.

The good news? You’re not powerless. You can ask questions. You can compare prices. You can choose to pay cash when it saves money. And you can demand transparency.

Because you shouldn’t have to pay more for the same medicine just because you’re on the wrong side of a broken system.