What Medicare can learn from the VA’s $11 drug copay

Here is the answer. On 89 of the 100 most-prescribed brand-name drugs in Medicare Part D, the VA’s prices would have saved about $13 billion, or 11%, compared with Part D’s prices: about $104 billion at the VA’s prices instead of about $117 billion at Part D’s. We based this on how many prescriptions Part D filled for each drug in 2024, priced at 2026 prices. We even created an interactive dashboard for you to compare prices on the 89 top brand-name drugs that we could match with confidence in both programs.

Orange bars are drugs with a 2026 Medicare negotiated price. For all of them except NovoLog, the VA’s listed price is higher than Medicare’s.

What the public prices leave out

But here’s the rub. There are all sorts of data available in the public domain on both VA and Medicare drug prices – and none of it is what these programs pay. Analyzing public drug pricing data is like analyzing the list prices on clothes at Marshalls, where you may find a “Compare at” price of $50 for a shirt selling for $10. Who cares if the Compare at price is $50? Two groups – those excited about a markdown on fast fashion and the entire prescription drug supply chain.

But it’s not fair to Marshalls to use it as an analogy for U.S. drug pricing. At least everyone can see the actual price at Marshalls. When it comes to drug prices, the final net price of drugs is totally hidden from the public. Instead, we all see the “Compare at” price that the patient is subject to at the counter, and then hidden rebates change hands behind the scenes. So that math I presented at the top of this post? That’s all based on the prices we see on the surface before these rebates. Part D plans get rebates, and the VA gets discounts below its published prices (different mechanics, but same difference), invalidating this analysis immediately.

Medicare’s own actuaries track how large those hidden payments are.

Except the analysis still matters, not for the government and insurers, who get the rebates and discounts, or veterans, who only have copays for their drugs (and therefore are not subjected to inflated Compare at prices), but for the Americans in the booming Medicare Part D program (thanks to the aging of America) which now provides drug coverage for about 58 million people. Why? Because here our elderly pay for drugs based on a byzantine five- or six-tier system where insurers collect money from them based on the drug’s inflated pre-rebate price, are free to set their own prices for drugs differently across their own plans, and put off-patent generic drugs in tiers usually used for more expensive brand-name drugs. In other words, Medicare isn’t just subjecting Americans to fake inflated list prices by giving them a deductible to meet and making them pay coinsurance, it’s giving the plans managing Part D the latitude to monkey with the drug prices themselves (especially generic drugs) to optimize their profit.

Generic drugs on brand-name tiers

Here is how often Part D plans put generic drugs on the tiers usually used for brand-name drugs.

The 5,295 Part D plans that use five or six tiers cover about 48 million people, and 76% of those people are in plans that are part of the five largest parent company insurers: UnitedHealth Group, Humana, Centene, CVS Health and Health Care Service Corporation. Across these plans, 53% of generic drug listings sit on tiers 3 to 5. That counts each strength and form of a drug once per plan, and it counts plans, not people. Newer generics land there more often. When the first generic of a drug was approved less than 10 years ago, 83% to 94% of its listings are on tiers 3 to 5. For generics that have been around for 20 years or more, it is still 42%.

The tier matters because of how plans charge for it. On tiers 1 and 2, most plans charge a flat copay; only 4% and 10% of plans charge coinsurance. On tier 3, 70% of plans charge coinsurance, a percentage of the drug’s price. That rises to 91% of plans on tier 4 and 99% on tier 5. The deductible applies to tiers 3 to 5 in 81% to 87% of plans, compared with 11% and 22% of plans on tiers 1 and 2. So a generic placed on a brand tier is usually charged to the patient as a share of its price, and often only after the deductible is met. Before that, they pay the plan’s full price for the drug.

What patients pay

So, after all of this, here is the main difference we should remember between the VA and Medicare Part D.

Pay attention.

Americans don’t care about drug prices. They care about what they pay for drugs. Veterans, through the VA, pay a fixed copay (no more than $11 for a month’s supply, and many pay nothing) for drugs. A reasonable amount. They don’t need to worry about any of this.

But the 58 million Americans on Medicare Part D do. They are not all paying a small, fixed copay for their drugs. They are subjected to inflated pre-rebate prices and rarely see a dime of rebates at the counter. By the way, if your employer’s insurance makes you meet a deductible, or pay coinsurance, you are in this same predicament, paying for your drugs based on the fake list prices rather than the real net price.

Here is what that looks like for a month’s supply of the brand-name drugs Medicare spends the most on.

What real Part D plans charge

Real plans tell the same story, even for the drugs Medicare negotiated. Four drugs in this chart have a 2026 negotiated price: Eliquis, Jardiance, Xarelto and Farxiga. Among Part D plans with five or six tiers, more than 99% of the plans that cover these drugs put them on tiers 3 to 5. Most of these plans, 63% to 70%, charge coinsurance instead of a flat copay, and the deductible applies in 78% to 81% of them. After the deductible, the median plan charges $43 to $47 for a 30-day fill, compared with $11 at the VA. Medicare negotiated a lower price for these drugs, but most plans still charge a share of that price instead of a fixed copay.

Revlimid, a cancer drug, shows the same thing for a generic. Only 225 of the 5,295 plans with five or six tiers cover brand Revlimid. All 5,295 cover the generic, lenalidomide, and none of them puts it on a generic tier: 5,283 put it on tier 5, the specialty tier, and the other 12 on tier 4. Nearly all of them (99%) charge coinsurance on it, from 25% to 33% of the price. What plans pay for the generic varies widely, but at the median plan, one 28-day cycle of 21 capsules costs about $6,600. In about half of the plans, a patient reaches the $2,100 yearly limit with the first fill, and in 85% of plans by the second.

VA wins through copays

First off, if you are running around talking about expanding Medicare, please, first understand Medicare’s flaws. The terms “universal healthcare” and “Medicare for all” are not interchangeable.

Second, fixing drug pricing for Americans is easy – just disconnect their cost of drugs from the drugs’ fake prices. The VA does this. Medicaid mostly does this too. Commercial insurance and Medicare Part D often do not.

I can already hear the pushback. Premiums would skyrocket if the government didn’t intervene. This would undoubtedly happen in Part D if the government didn’t intervene. But isn’t that telling us something? How can there be all these $0 premium Part D plans out there? Insurers get to make their money off the drug prices themselves, rather than what we entrust them to do – offer insurance.

Conclusion: Three recommendations

There is so much wrong with healthcare pricing in America that it’s hard to know where to even start. So, I’ll give three recommendations.

First, we need to figure out an easy way to disconnect the patients’ cost of drugs (and medical services for that matter) from the smoke and mirrors costs that lurk behind the scenes. A copay-based plan does that. It will create another problem (higher premiums), but the government could subsidize that as it worked on fixing the root cause of the illness in this system – price discrimination.

Second, at the very least, if you aren’t going to require copay-based plans, why not make sure that insurers put all generic drugs on generic tiers, rather than dressing them up in a brand-drug Halloween costume and putting them on a brand tier, forcing patients to pay more for them?

Third, and most importantly, while healthcare gets a lot of attention, it is one of the most difficult problems to fix now facing Americans. I’ll point you to the crisis unfolding in SNAP right now, where enrollment and authorized stores are both falling at an unusual clip. I don’t know about you, but which would you worry about more? An empty fridge and pantry, or the risk of paying too much for drugs? I worry that millions of Americans are looking down the barrel of empty fridges right now. To make matters worse, those same Americans may lose their healthcare as Medicaid cuts take hold.

The house is burning for millions of our most vulnerable Americans. Let’s put out the fire first.

How we built this

VA prices are the Big4 prices on the VA’s pharmaceutical price list as of November 1, 2026. Part D prices are the median price across Part D plans in CMS’s plan pricing files for the third quarter of 2026. Both are before rebates and discounts, which are not public. The 100 drugs are the brand-name drugs with the most Part D prescriptions in 2024, from CMS’s Part D Spending by Drug data. Plan tiers and cost sharing come from the same CMS plan files, and plan enrollment comes from CMS’s October 2026 enrollment report. The data, code and method notes are on GitHub.