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Medicare Part D Formularies: How Generic Coverage Works in 2025

By 2025, nearly 92% of all prescriptions filled under Medicare Part D are generics. That’s not just a statistic-it’s the backbone of how millions of seniors and people with disabilities pay far less for their meds. But knowing that generics are cheap doesn’t mean you know how they actually work inside your plan’s formulary. And that gap? It can cost you hundreds-or even thousands-extra every year.

What Exactly Is a Medicare Part D Formulary?

A formulary is just a list of drugs your plan covers. Think of it like a menu: not everything is available, and what’s on it determines what you pay. Medicare Part D doesn’t cover drugs directly. Instead, private insurance companies (like Humana, UnitedHealthcare, or Aetna) offer plans approved by Medicare. Each one builds its own formulary, but they all have to follow federal rules.

By law, every Part D plan must cover at least two different generic drugs in each major drug category-like blood pressure meds, diabetes pills, or antidepressants. And for six critical drug classes (immunosuppressants, antidepressants, antipsychotics, anticonvulsants, antiretrovirals, and antineoplastics), they have to cover every available generic. That’s not just a suggestion. It’s a requirement.

But here’s the catch: even if a generic is FDA-approved and on the market, your plan might not list it. Or worse-they might cover one generic version of a drug but not another, even if they’re chemically identical. That’s called therapeutic interchange, and it’s a common source of confusion.

How Generic Drugs Are Organized in Tiers

Part D formularies use a five-tier system to sort drugs by cost. Generics live mostly in the bottom two tiers:

• Tier 1: Preferred Generics - These are the cheapest. Most plans charge $0 to $15 for a 30-day supply. Common meds like lisinopril (for blood pressure), metformin (for diabetes), or atorvastatin (for cholesterol) usually land here.
• Tier 2: Non-Preferred Generics - Still generic, but not the plan’s top pick. You might pay $15 to $40 per month, or 25-35% coinsurance. These are often newer generics or ones with less competition.

Brand-name drugs? They start at Tier 3 and go up to Tier 5 (specialty drugs). Those can cost $40 to $100+ per month-even more if you’re in the coverage gap.

Why does this matter? Because your out-of-pocket costs depend on which tier your drug is on. A Tier 1 generic might cost you $5. A Tier 2 version of the same drug? $35. Same active ingredient. Same effect. But a $30 difference every month adds up to $360 a year.

The 2025 Out-of-Pocket Cap Changed Everything

Before 2025, there was a notorious hole in Medicare Part D called the “donut hole.” Once you spent a certain amount, you paid 100% of your drug costs until you hit a high threshold. That hit hard for people on multiple generics.

The Inflation Reduction Act of 2022 fixed that. Starting January 1, 2025, there’s a hard cap: you pay no more than $2,000 out of pocket for all your drugs in a calendar year. In 2026, it goes up to $2,100.

Here’s how it works with generics:

1. You pay your deductible ($615 in 2025).
2. Then you pay 25% coinsurance on generics during the initial coverage phase.
3. Once your total out-of-pocket spending hits $2,000, you enter catastrophic coverage.
4. After that? You pay $0 for every generic drug for the rest of the year.

This is huge. Before 2025, people on multiple generics could spend $5,000 or more just to get through the donut hole. Now, once you hit $2,000, your meds are free. That’s a $3,000+ annual savings for many.

Why Generics Cost Less-But Still Count Toward Your Cap

You might think: if generics are so cheap, how do you even hit $2,000? The answer: volume.

Someone taking three or four generic drugs every month can easily rack up $100-$150 in monthly out-of-pocket costs. That’s $1,200-$1,800 a year. Add in a few specialty generics or unexpected price hikes, and you’re at the cap before December.

And here’s something most people don’t realize: only the amount you pay counts toward the $2,000 cap for generics. For brand-name drugs, 70% of the drug’s full cost (including manufacturer discounts) counts toward your cap. But for generics? Only your actual payment matters.

That means if your plan pays $20 for a generic and you pay $5, only $5 counts toward your cap. If you’re on multiple generics, you’re paying out of pocket for the full cost-so you reach the cap faster than you think.

What You Can Do to Save More

Knowing how the system works is half the battle. Here’s what you can actually do:

• Check your plan’s formulary every fall. About 37% of plans change their generic tiers each year. A drug that was Tier 1 last year might be Tier 2 this year. Your Annual Notice of Change (ANOC) arrives in September-read it.
• Use the Medicare Plan Finder. Don’t guess. Enter your exact medications (including dosage and frequency) and sort by lowest total cost. KFF found that people who use this tool save an average of $427 a year.
• Look for $0 deductible plans. Over half of stand-alone Part D plans in 2025 have no deductible. If you’re on a few generics, skipping the deductible can save you $615 right off the bat.
• Ask for a coverage determination. If your generic isn’t covered, you can appeal. CMS data shows 83% of these requests get approved. You’re not stuck.
• Switch plans if needed. In 62% of cases, you can find a cheaper plan in your area that covers your generics better. Don’t assume your current plan is the best.

Common Problems and How to Fix Them

People run into the same issues over and over:

• “My pharmacist gave me a different generic.” Pharmacists are allowed to substitute one generic for another unless your doctor says “do not substitute.” But if your plan doesn’t cover that substitute, you pay full price. Always ask: “Is this the generic my plan covers?”
• “I’m being charged for a drug I thought was free.” That’s usually because you haven’t hit your $2,000 cap yet. Check your plan’s monthly statement. You’ll see your cumulative out-of-pocket spending.
• “My plan covers one generic for high blood pressure but not another.” This is legal, but frustrating. If you’re on a specific generic that works for you, request a formulary exception. Most plans approve it if your doctor explains why.

Reddit users in r/Medicare talk about this all the time. One person paid $120 for a generic blood pressure pill because their plan only covered a different version. Another saved $300 a month because their three heart meds were all Tier 1. The difference? Knowing how to read the formulary.

What’s Changing in 2026 and Beyond

The changes aren’t stopping:

• Starting in 2026, all Part D plans must include a generic price comparison tool in their member portals. You’ll be able to see which generic version costs the least before you fill your prescription.
• In 2029, Medicare will start negotiating prices for certain generics-starting with insulin glargine. That could bring prices down even further.
• There’s growing pressure to require plans to cover all generics in a class if they cover any. That would end the “one generic only” problem.

By 2027, analysts predict 95% of beneficiaries will have access to $0 copays for at least half of their commonly used generics. That’s not fantasy-it’s the direction the system is heading.

Bottom Line: Generics Are Your Best Friend in Medicare Part D

Generics aren’t just cheaper-they’re smarter. They work the same. They’re tested the same. And under the new rules, they’re more affordable than ever. But you have to be active. You can’t just rely on your plan to do the work for you.

Know your drugs. Know your tiers. Know your cap. Check your formulary every year. Use the tools. Ask questions. And if something doesn’t make sense? Appeal. You have rights. And with the $2,000 cap, you’re finally protected from the worst of the costs.

Medicare Part D was designed to help people afford their meds. Generics are the reason it works. But only if you know how to use them.