Key Takeaways

• Even in 2025, Medicare Part D plans include exclusions, tiers, and network restrictions that can drive up your out-of-pocket drug costs.

• Understanding the fine print in your plan can help you avoid unexpected expenses, delays in medication access, or coverage denials.

What Medicare Part D Covers—and What It Doesn’t

Medicare Part D helps cover the cost of prescription drugs, but coverage isn’t unlimited. Each plan has its own list of covered drugs, called a formulary, which is organized into cost tiers. Drugs not on the formulary are typically not covered at all, and you may have to pay full price.

Covered medications usually include:

• Prescription drugs needed for chronic conditions (e.g., blood pressure, cholesterol, diabetes)

• Medications used in outpatient settings

• Some vaccines, such as shingles and flu shots

However, the following are typically not covered under Part D:

• Over-the-counter medications

• Drugs for weight loss or gain

• Fertility treatments

• Cosmetic drugs (e.g., hair growth treatments)

• Medications not approved by the FDA

You need to check the plan’s formulary every year—especially during Open Enrollment from October 15 to December 7—to ensure your medications are still covered in the upcoming year.

Tiered Pricing Can Lead to Surprise Costs

Most Medicare Part D plans use a tiered pricing structure, which groups drugs into categories based on cost:

• Tier 1: Preferred generic drugs (lowest cost)

• Tier 2: Non-preferred generics

• Tier 3: Preferred brand-name drugs

• Tier 4: Non-preferred brand-name drugs

• Tier 5: Specialty drugs (highest cost)

Even if your drug is covered, the tier it’s placed in determines your share of the cost—through copayments or coinsurance. Many plans require coinsurance (a percentage of the drug’s cost) for higher tiers, which can be costly for brand-name or specialty drugs.

Preferred Pharmacies vs. Out-of-Network Pharmacies

Part D plans often include a network of preferred pharmacies, which offer the lowest cost-sharing options. If you fill your prescriptions at a pharmacy outside this network, you may:

• Pay higher prices

• Be responsible for the full cost of the drug

• Encounter delays in reimbursement

Using preferred pharmacies is especially important if your plan offers tiered pharmacy pricing. Always verify whether your local pharmacy is in-network before filling prescriptions.

Prior Authorization and Step Therapy: Hidden Hurdles

Some drugs on your plan’s formulary require prior authorization, which means your doctor must get approval from the plan before the medication is covered. This can cause delays in treatment if not handled promptly.

Another tactic used by many plans is step therapy. You may be required to try one or more lower-cost drugs first—and fail to get the desired result—before the plan will approve coverage for a more expensive option.

These policies aim to reduce costs for the plan but can be frustrating if you need access to a specific medication quickly.

The 2025 Coverage Phases—and Where You Pay More

Medicare Part D has four distinct coverage phases. In 2025, these phases still matter—even with the $2,000 out-of-pocket cap introduced this year.

1. Deductible Phase: You pay the full cost of your drugs until you meet the plan’s deductible (up to $590 in 2025).

2. Initial Coverage Phase: You pay a portion (usually coinsurance or copay), and the plan pays the rest.

3. Catastrophic Phase (Redesigned for 2025): Once your out-of-pocket drug costs reach $2,000, your plan covers 100% of covered drug costs for the rest of the year.

While the elimination of the coverage gap (donut hole) and the new cap are major improvements, you still face substantial costs during the deductible and initial coverage phases—especially for brand-name or specialty drugs.

Not All Pharmacies Are Equal in Cost

Even within your network, not all pharmacies charge the same amount. Some plans contract with specific chains or mail-order services to offer lower negotiated rates. Using a non-preferred but in-network pharmacy can still lead to higher costs.

Before selecting a plan, check if:

• Your preferred pharmacy is in-network

• You’re required to use mail-order services for maintenance drugs

• The plan offers lower cost-sharing at certain retail locations

Choosing the right pharmacy can make a significant difference in your annual drug costs.

Your Drug May Be Dropped Next Year

Medicare Part D plans update their formularies every year. If a drug you rely on is dropped or moved to a higher tier in 2025, you may face:

• Higher out-of-pocket costs

• The need to switch medications

• A complex exception request process

You’ll receive an Annual Notice of Change (ANOC) in September. Review it carefully. If your current drug is no longer covered or becomes more expensive, you can switch plans during the annual Open Enrollment period.

You May Need an Exception—but It’s Not Guaranteed

If your drug is not covered, or is placed in a tier with high cost-sharing, you can request a formulary exception. However, approval is not automatic. You’ll need:

• A statement from your prescriber explaining why the drug is medically necessary

• Documentation of past treatment failures or side effects

• Time to wait while the plan processes your request (which can take several days to weeks)

There is an appeals process if your request is denied, but even then, the outcome may not be favorable.

Extra Help Isn’t Automatic—and You Must Qualify

While programs like Extra Help (also called the Low-Income Subsidy) exist to assist with drug costs, they are not available to everyone. In 2025, to qualify, your income and assets must fall within specific federal limits. If you do qualify:

• You’ll pay reduced or no deductibles

• Your copayments will be significantly lower

• You may avoid the $2,000 out-of-pocket cap altogether

But you must apply and be approved. Enrollment is not automatic, even if your income is low.

Mail-Order Isn’t Always the Cheapest Option

Many plans promote mail-order pharmacies for maintenance medications, often suggesting lower prices and longer supply (like a 90-day fill). While this may be convenient, it’s not always the most affordable choice.

Prices can vary by drug and plan. For some medications, retail pharmacies may have lower negotiated prices. Always compare costs across both mail-order and retail before committing.

Formularies Don’t Always Cover Generics

You might assume that every generic drug is covered under every plan. That’s not the case. Some plans:

• Don’t include certain generics in their formulary

• Require prior authorization even for generics

• Assign generics to non-preferred tiers

It’s essential to review the plan’s drug list rather than assuming a generic will automatically be affordable.

Even Vaccines Have Conditions

Part D covers many common vaccines, but not all are free of cost. In 2025, the shingles vaccine, flu shots, and COVID-19 boosters are typically covered. However, availability and cost-sharing may depend on:

• Whether the vaccine is administered at an in-network pharmacy or clinic

• Whether the provider participates with your plan

• The coding used by the provider when billing

Receiving a vaccine at an out-of-network location may result in unexpected charges.

What You Can Do Now to Avoid Paying More

Take proactive steps to ensure you’re not blindsided by drug costs:

• Review your plan’s formulary every year

• Use the Medicare Plan Finder during Open Enrollment

• Confirm whether your pharmacy is in-network and preferred

• Ask your doctor to document medical necessity if an exception may be needed

• Compare mail-order vs. retail pricing on specific drugs

These efforts can help you stay ahead of changes and avoid surprises at the pharmacy counter.

Reading the Fine Print Can Save You in 2025

While Medicare Part D has improved significantly with the $2,000 cap in 2025, the fine print still holds plenty of room for unexpected costs. Between tier shifts, pharmacy restrictions, and formulary changes, your best protection is knowledge and preparation.

If you’re unsure whether your current plan still meets your needs, or if you want help understanding the details, get in touch with a licensed agent listed on this website. An experienced agent can review your drug list, check plan options, and guide you through enrollment or changes.