By 2025, nearly 92% of all prescriptions filled under Medicare Part D are generic drugs. That’s not just a statistic-it’s a lifeline for millions of seniors and people with disabilities who rely on affordable medications to manage chronic conditions like high blood pressure, diabetes, and depression. But understanding how these generics are covered isn’t simple. Formularies, tiers, coinsurance, and out-of-pocket caps all interact in ways that can make your monthly drug bill skyrocket-or drop to zero. Here’s how it really works.

What Is a Medicare Part D Formulary?

A formulary is just a list of drugs your Medicare Part D plan covers. Think of it like a menu: if it’s not on the list, you’re paying full price. Every plan has its own formulary, and they’re not all the same. But they all follow federal rules set by the Centers for Medicare & Medicaid Services (CMS). For example, every plan must cover at least two different generic drugs in each major drug category-like blood pressure meds or antidepressants. And they must cover at least 85% of all drugs in those categories, including generics.

There are six protected drug classes where coverage is even stricter: immunosuppressants, antidepressants, antipsychotics, anticonvulsants, antiretrovirals, and antineoplastics. For these, plans must cover every single FDA-approved generic version. No exceptions. This is meant to ensure you don’t get stuck without the right treatment.

The Five-Tier System: Where Generics Fit In

Part D plans organize drugs into five tiers. The lower the tier, the less you pay. Generics almost always land in Tier 1 or Tier 2.

• Tier 1 (Preferred Generics): These are the cheapest. You might pay $0 to $15 for a 30-day supply. Most plans put common generics here-like lisinopril for blood pressure or metformin for diabetes.
• Tier 2 (Non-Preferred Generics): Slightly more expensive. You could pay $20 to $40, or 25-35% coinsurance. This tier often includes newer generics or ones with less competition.
• Tier 3 (Preferred Brand-Name Drugs): Brand-name drugs with generic alternatives. Expect $40-$100.
• Tier 4 (Non-Preferred Brand-Name Drugs): No generic available yet. Costs can hit $100-$200.
• Tier 5 (Specialty Drugs): High-cost medications, often for cancer or rare diseases. Some generics here still cost hundreds.

Here’s the key: if your generic is on Tier 1, you’re getting the best deal. If it’s on Tier 2, you’re paying more-but still way less than the brand version.

How Much Do You Pay for Generics in 2025?

Your out-of-pocket costs depend on what phase of coverage you’re in. In 2025, there are four phases:

1. Deductible Phase: You pay 100% until you hit $615 (up from $590 in 2024). Not all plans have a deductible-52% of stand-alone Part D plans in 2025 offer $0 deductibles for generics.
2. Initial Coverage Phase: After the deductible, you pay 25% coinsurance for generics. The plan pays the rest. This applies until your total out-of-pocket spending hits $2,000.
3. Catastrophic Coverage Phase: Once you hit $2,000 out-of-pocket, you pay nothing. Not $0.25. Not $1. Zero. This is new as of January 1, 2025. Before this, you paid 5% coinsurance even after hitting the gap. Now, it’s gone.
4. Out-of-Pocket Cap: The $2,000 limit is a hard cap. Once you hit it, you’re protected for the rest of the year. In 2026, it rises to $2,100.

Here’s a real example: If you take three Tier 1 generics that cost $10 each, your monthly cost is $30. Over a year, that’s $360. You’d hit the $2,000 cap in under 6 months. After that, your meds are free.

Why Generics Cost So Much Less Than Brands

Generics work the same as brand-name drugs. Same active ingredients. Same FDA approval. But they cost 80-90% less because they don’t need to pay for research, marketing, or patent protection.

Here’s the math: In 2023, generics made up 92% of Part D prescriptions but only 18% of total drug spending. That’s because a $10 generic saves you $100 compared to the brand. And it saves the program billions. Medicare pays 75% of the cost for generics during initial coverage, compared to 72.5% for brand-name drugs. That small difference adds up fast.

But here’s the twist: when you pay for a brand-name drug, 70% of the drug’s cost-including manufacturer discounts-counts toward your $2,000 cap. For generics, only what you actually pay counts. That means if you take mostly brand-name drugs, you hit the cap faster. If you take generics, you pay less upfront, but it takes longer to reach the cap. For most people, that’s still better.

What’s Changed in 2025?

The Inflation Reduction Act didn’t just tweak Part D-it rewrote the rules.

• Hard $2,000 cap: No more “donut hole.” You don’t pay anything after hitting $2,000 out-of-pocket.
• Price negotiation: Starting in 2029, CMS will negotiate prices for certain generics. Insulin glargine is already on the list.
• Price comparison tools: By 2026, every Part D plan must offer a tool in their member portal showing you the lowest-cost generic alternative for your meds.

These changes are already saving people an average of $450 a year on generics, according to CMS. And by 2027, 95% of beneficiaries will have access to $0 copays for at least half of commonly used generics.

What You Need to Do to Save Money

You can’t just assume your plan covers your meds. Here’s how to protect yourself:

1. Check your plan’s formulary every fall. 37% of plans change at least one generic’s tier each year. That could mean your $0 drug suddenly costs $40.
2. Use the Medicare Plan Finder. Enter your exact medications and zip code. KFF found people who use it save $427 a year on average.
3. Ask for a coverage determination. If your generic isn’t covered, you can appeal. 83% of these requests get approved.
4. Choose a $0 deductible plan. If you take multiple generics, skipping the deductible can save you hundreds.
5. Ask your pharmacist about substitutions. Sometimes they switch your generic to another in the same class. If your plan doesn’t cover that one, you’ll pay full price. Ask them to stick with your formulary-approved version.

Common Problems and How to Fix Them

Not everything runs smoothly. Here’s what trips people up:

• Therapeutic interchange: Your plan covers one generic for blood pressure, but not another-even though they’re identical. You get stuck paying full price. Solution: Request a coverage determination or switch plans.
• Authorized generics: These are brand-name drugs sold as generics by the same company. They’re not always covered under the same rules. Check if your plan treats them as brand or generic.
• Confusing tiers: 62% of beneficiaries don’t understand their plan’s tier system. Use the plan’s website or call customer service. Ask: “Is my generic on Tier 1?”

One user on Reddit said their plan switched their generic blood pressure med to a different one they didn’t cover. They paid $120 a month until they appealed. Another user said their three generics now cost $0-saving them $300 a month.

What Experts Say

Dr. Richard Frank from Harvard says the tiered system has saved the program $15.3 billion a year by pushing people toward generics. But Juliette Cubanski from KFF warns that 25% coinsurance can still be a burden for people on fixed incomes. And CMS itself admits formulary differences confuse beneficiaries-62% face coverage gaps when comparing plans.

The good news? Satisfaction is high. In 2024, 87% of beneficiaries taking mostly generics reported being satisfied with their drug coverage, compared to 76% for those on brand-name drugs.

What’s Next?

By 2030, CMS expects 94% of Part D prescriptions to be generics. New patents are expiring every year. More generics will hit the market. And with price negotiation starting in 2029, even more savings are coming.

For now, your best move is simple: know your drugs, know your plan, and check your formulary every year. The system works-but only if you use it right.