Insights + Resources

Managing Drug Costs

Nov 27, 2020

Drug Costs medicine in bottle on money
How can households meet the challenge?

Are prescription drug costs burdening your finances? Some people find it a challenge to manage the cost of prescription drugs. Americans pay an average of $1,200 per year for medicine. For those facing greater and more dangerous ailments, some drug costs are $10,000 per month or even lump sums in excess of $80,000 for certain drug therapies. Yes, health insurance and Medicare Part D can help you, but not everyone has access to Medicare, and not every insurance company has the same formulary. This means that your coverage may fall short—not something you want to hear when wrestling with a major diagnosis.1

How can a household try to manage drug costs? There are some approaches that may help.

Firstly, shop around & compare Part D plans annually. As you shop, keep in mind that plans with smaller premiums may have higher out-of-pocket drug costs. Some plans also limit monthly doses of certain drugs in their coverage or request patients to try less costly drugs before branded drug costs, which can be higher, can be prescribed.

Consider generics. A 2019 report from the Association for Accessible Medicines states that Americans saved $293 billion on generic drugs, with nearly $2 trillion saved over the previous decade. Most generic prescriptions get filled for $20 or less, while name-brand copays average over $40. Short version? Those savings are considerable, when available, and they add up.2

Stay within the plan network. If you go out of network for non-preferred medications, your cost for those medications may rise. That said, shopping around at different pharmacies may yield some savings.

Ask a compounding pharmacy if it can make a medication for you. In such an instance, the savings could be substantial.

Health Savings Accounts (HSAs) & Roth IRAs may also be useful. If you do not yet qualify for Medicare coverage, you may have the choice to create an HSA, which must be used in conjunction with a high-deductible health plan. Since HSAs are funded with pre-tax dollars, so the contributions will reduce your taxable income.3

There are also some HSA rules and limitations to consider. If you are single, you are limited to a $3,600 contribution for 2021, and $7,200 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.3

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you will be required to pay ordinary income taxes on HSA funds used for non-medical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

If you are the original owner of a Roth IRA, you do not have to start taking distributions at age 72. And if you are least 59½ years old and have owned the Roth IRA for at least five years, any distributions you take may be exempt from federal taxes.3

Lastly, see your doctor on a regular basis. A routine checkup could alert you and your primary care physician to what could become a chronic ailment. If treated early, that ailment could be allayed, even overcome. Undetected or untreated, it could result in a long-term health problem with long-run financial impact.

For additional insights and resources, be sure to sign up for our Weekly Market Commentary, follow our YouTube channel where we regularly post our Epic Market Minute videos, follow us on LinkedIn, or like us on Facebook. And as always, please don’t hesitate to reach out to a dedicated service professional at Epic Capital.

Tags: , , , , , , , ,

More Insights

Sep 23, 2022

The Federal Open Market Committee (FOMC) increased the target rate by 75 basis points (bp) to a 3.25% upper bound and delivered a more pessimistic outlook in their published Summary of Economic Projections.

Sep 21, 2022

  You may have seen this statistic before or one resembling it: the average 65-year-old retiring couple can now expect to pay more than $250,000 in healthcare costs during the rest of their lives. In fact, Fidelity Investments now projects this cost at $285,000. The effort to prepare for these potential expenses is changing the … Continue reading “Healthcare Costs are Cutting into Retirement Preparations”

Sep 19, 2022

Investors are routinely warned about allowing emotion to influence their decisions. However, they are less routinely cautioned about their preconceptions and biases that may color their financial choices. In a battle between the facts & biases, our biases may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when … Continue reading “Do Our Emotion or Biases Affect Our Financial Choice”

Sep 16, 2022

At one point or another, you may realize capital gains, which is a taxable event. What can you do about them? You can do what some investors do – you could recognize investments with a loss and practice “tax-loss harvesting.”

Sep 14, 2022

Everyone loves a winner. If an investment is successful, most people naturally want to stick with it. But is that the best approach? It may sound counterintuitive, but it may be possible to have too much of a good thing. Over time, the performance of different investments can shift a portfolio’s intent as well as … Continue reading “Rebalancing Your Portfolio”

Insights + Resources >