5 Things to Know About Pharmacy Networks and Medicare Drug Costs

With Medicare Open Enrollment in full swing, you may be exploring and comparing different plan options for 2025. While you’re at it, don’t forget to read up on each plan’s pharmacy network.

Just like health plans have in-network doctors and hospitals, they also have in-network pharmacies, where you’ll save money on your prescription medications. Some plans go a step further and have in-network preferred pharmacies, where consumers stand to pay even less. 

“Many people understand that there are certain pharmacies where their drugs may be less expensive,” says James McSpadden, senior policy advisor at AARP’s Public Policy Institute and the author of a recent AARP report on the topic. “But I'm not sure that people fully grasp the cost differences that may be available” between in- and out-of-network pharmacies, and even between pharmacies within a network."

Here are five things to know about how pharmacy networks work and the steps you can take to make sure you’re getting the best deal on your meds.  

1. You’ll get your plan’s Rx benefits at an in-network pharmacy  

Ever notice how the same medication can cost more at one pharmacy versus another?

If you’re filling your prescription drugs at an out-of-network pharmacy, you’re most likely going to pay more than you would at an in-network pharmacy. That’s because health plans contract with a group, or network, of pharmacies — including in-person pharmacies and mail-order pharmacies — to offer prescription drugs and other services to their members at a lower cost.

So when choosing a prescription drug plan, you’ll want to make sure that your favorite pharmacy (and possibly a few other convenient ones) are included in your plan’s network. Your pharmacy should be able to let you know if it’s in-network for your plan or a plan that you are considering.

2. You may save even more money at a preferred pharmacy  

Within a pharmacy network, your plan may have preferred pharmacies, where you could have even lower out-of-pocket expenses for your medications than an in-network pharmacy that isn’t preferred. These savings vary, but McSpadden’s report notes a recent study which found that people who use a preferred pharmacy could save $2 to $15 per fill on generic drugs.

Preferred pharmacy networks are becoming more common among Medicare health plans. In 2022, 97 percent of Medicare Part D plans had preferred pharmacy networks, up from 13 percent in 2011. Roughly 60 percent of Medicare Advantage Part D plans also utilize preferred pharmacy networks, according to AARP’s report.