When you’re on Medicare and need prescription drugs, understanding how generic coverage works in Part D can save you hundreds - even thousands - of dollars each year. Most people don’t realize that nearly 92% of all prescriptions filled under Medicare Part D are for generic drugs. That’s not just a statistic; it’s your key to lower costs. But knowing generics are cheaper isn’t enough. You need to know how the system is built, where your drugs fall, and what changes in 2025 mean for your wallet.
How Medicare Part D Formularies Are Structured
Every Medicare Part D plan has a formulary - a list of drugs it covers. This isn’t random. It’s carefully organized into five tiers, and generics are placed where they make the most financial sense: the bottom two tiers.
Tier 1 is for preferred generics. These are the most commonly used, lowest-cost versions of brand-name drugs. Think of them as the go-to options your plan wants you to use. A 30-day supply here usually costs $0 to $15. Tier 2 is for non-preferred generics. These are still generics, but they might be newer, less commonly prescribed, or slightly more expensive. You’ll pay more here - anywhere from 25% to 35% of the drug’s cost, or a fixed copay up to $40.
By contrast, brand-name drugs start on Tier 3, and specialty drugs (even if they have generic versions) land on Tier 5, often costing over $100 per month. The system pushes you toward the cheapest effective option. And for most people, that’s a generic.
What Changed in 2025 - The $2,000 Cap
Before 2025, there was a big gap in coverage called the "donut hole." Once you spent a certain amount on drugs, you paid 100% out of pocket until you hit a higher threshold. That’s gone. Thanks to the Inflation Reduction Act, as of January 1, 2025, your total out-of-pocket spending on all drugs - including generics - is capped at $2,000 per year.
Here’s how it works: You pay 25% coinsurance on generics during the initial coverage phase. That means if a generic costs $100, you pay $25. Your plan pays the other $75. This continues until you’ve paid $2,000 in total out-of-pocket costs. Once you hit that number, you enter catastrophic coverage - and for the rest of the year, you pay nothing. Zero. Not even a copay.
This change is huge. Before, someone taking multiple generics could easily hit the donut hole and end up paying hundreds of dollars a month. Now, once you’ve paid $2,000, your drugs are free. That’s not just a policy tweak - it’s a financial reset for millions.
Why Generics Cost So Much Less
Generic drugs aren’t just cheaper because they’re "copycats." They’re cheaper because they don’t need to pay for research, marketing, or patent protection. Once a brand-name drug’s patent expires, other manufacturers can make the same medicine. The FDA requires them to prove they’re identical in strength, safety, and effectiveness.
That’s why 92% of prescriptions are generics - but they only account for 18% of total Part D spending. In 2024, Part D spent $185 billion on drugs. Generics made up $33.3 billion of that. The rest went to brand-name drugs, even though they were prescribed far less often.
And here’s the kicker: when you pay for a brand-name drug, 70% of the cost (including manufacturer discounts) counts toward your $2,000 out-of-pocket cap. But for generics, only your actual payment counts. That means generics help you reach the cap faster - and get to free drugs sooner.
What You Need to Do Every Year
Your plan’s formulary can change every year. A drug that was on Tier 1 last year might move to Tier 2. Or worse - it might be removed entirely. That’s why you can’t just enroll once and forget it.
Each fall, you’ll get an Annual Notice of Change (ANOC). Read it. If a drug you take is being moved to a higher tier or dropped, you have options. You can switch plans during the Annual Enrollment Period (October 15 to December 7). Or you can request a formulary exception - a formal appeal to keep your drug covered.
Use the Medicare Plan Finder tool. Type in your exact medications - not just the name, but the dose and form (tablet, capsule, etc.). Compare plans side by side. KFF found that 61% of people who do this save an average of $427 a year. That’s not a guess - that’s real money.
Common Problems and How to Fix Them
Not everything is smooth. Here are the top three issues people run into:
- Your pharmacist substituted a different generic. Just because two drugs are "therapeutically equivalent" doesn’t mean your plan covers both. If your plan covers only one generic for blood pressure, and your pharmacist gives you another, you might pay full price. Always ask: "Is this the version my plan covers?"
- Your plan doesn’t cover a generic you need. If your doctor prescribes a generic that’s not on your formulary, you can file a coverage determination. In 2023, 83% of these requests were approved. Don’t assume you’re stuck - ask.
- You’re confused about tiers. If you’re on multiple generics, you might be paying different amounts each month. Use your plan’s online portal. Most now have a "Drug Cost Estimator" tool. Plug in your meds and see exactly what you’ll pay.
One user on Reddit said they were charged $120 for a generic heart medication because their plan only covered a different version. Another said their three generics cost $0 thanks to Tier 1 coverage - saving them $300 a month. The difference? Knowing the system.
What’s Coming Next
The changes aren’t over. Starting in 2026, Part D plans must include a "generic price comparison tool" in their member portals. That means you’ll be able to see, right in your account, which generic version of your drug costs the least - even if it’s not the one your doctor prescribed.
In 2029, the government will start negotiating prices for certain generics. Insulin glargine (the generic version of Lantus) is already on the list. That could bring prices down even further.
And by 2027, experts predict 95% of Part D beneficiaries will have access to $0 copays for at least half of their commonly used generics. That’s not a dream - it’s the direction the system is heading.
Key Takeaways
- Generics make up 92% of Part D prescriptions - and only 18% of spending.
- Tier 1 generics usually cost $0-$15; Tier 2 can cost 25-35% coinsurance.
- The $2,000 out-of-pocket cap in 2025 means once you hit it, your drugs are free for the rest of the year.
- Only your actual payments count toward the cap for generics - not manufacturer discounts.
- Review your plan’s formulary every fall. Use the Medicare Plan Finder to compare.
- If a drug isn’t covered, request a coverage determination - 83% of requests are approved.
Are all generic drugs covered under Medicare Part D?
Almost all FDA-approved generics are covered, but not every single one. Plans must cover at least two generics in each therapeutic class, and they must include 100% of generics in six protected drug classes (like antidepressants and antiretrovirals). But plans can exclude generics for weight loss, fertility, or cosmetic use. Always check your plan’s formulary before enrolling.
Why does my plan cover one generic but not another for the same condition?
Plans choose which generics to cover based on cost and clinical effectiveness. Even if two generics are chemically identical, one might be cheaper to purchase. Your plan might cover only the lowest-cost option to keep premiums down. If you need a different generic, you can request a formulary exception - and you have a good chance of approval.
Do generic drugs work the same as brand-name drugs?
Yes. The FDA requires generics to have the same active ingredient, strength, dosage form, and route of administration as the brand-name drug. They must also meet the same quality and safety standards. The only differences are inactive ingredients (like fillers or dyes) and cost. For most people, generics work just as well - and often better, because they’re more affordable.
Can I switch plans if my generic drug is removed from the formulary?
Yes. If your plan removes a drug you’re taking, you’ll get an Annual Notice of Change. You can switch to another plan during the Annual Enrollment Period (October 15-December 7). In some cases, you may qualify for a Special Enrollment Period if your drug is removed mid-year - but you’ll need to act quickly.
How do I find out which tier my generic drug is on?
Log in to your plan’s website and use their formulary search tool. You can also call the customer service number on your card and ask for the tier placement. The Medicare Plan Finder tool also shows tier information when you enter your medications. Don’t guess - check it every year.
