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Understanding your Prescription Insurance: DAW and other Penalties

Prescription plans have penalties?!

The answer to that exclamation is YES. Some plans do, in fact, have penalties. Penalty is a dirty word, and one that I am sure, thows up your defenses. This is not something new to prescription plans and I definitely understand your concern. In this economy, everyone is trying to stretch their dollar.

This is about protecting your money. Why pay penalties when you don't have to. Find out from your prescription benefit manager or consult your prescription plan booklet to see if you have penalties in your future.

There are many types of penalties, but I will be focusing on the following:

  • DAW penalties
  • Retail penalties
  • Annual fill limits

Hubs in Prescription Insurance Series

DAW Penalties

Dispense as Written Penalties - This is subject to your plan's guidelines and you will want to research your own plan to see what it means for your individual plan. If you see this anywhere on your plan, you should find out the details.

Definition: Difference in price between the "brand" drug dispensed by the pharmacy and a "generic" drug that was available and could have been dispensed. This amount is paid by the cardholder as a penalty for not taking the "generic" drug.

In a nutshell, this penalty means that if you or your doctor insist on taking the brand name drug when there is a direct generic available for the drug, you will pay more for that brand name drug.

Example: Your doctor says you must take Coumadin, but there is a generic called Warfarin.

Your plan usually stipulates what the penalty will be and how it will affect your overall prescription coverages. Usually you pay the retail cost difference between that brand and generic drug, which can range into the hundreds of dollars. The plan you are with will determine if they only want to charge this penalty if you, the member, decide not to take the generic, or if your doctor says you are not to take the generic.

Some plans will allow you to appeal the decision, you can learn about the appeals program from the hub Quantity Limits and Prior Authorization. Some plans have certain conditions that trigger this penalty, like if more than one manufacturer makes that specific generic, basically stating that you should try a different manufacturer.


Retail Penalties

I know that most people have 1 local retail pharmacy that they are loyal to and that they do not want to change. Sometimes, a prescription plan will stipulate that you get your maintenance drugs for 90 days at a time. Most plans will not allow a retail pharmacy to dispense more than 30 days supply.

This puts you in a bit of a pickle.

It is good to check and see if your prescription plan has any sort of retail penalty built into it. Usually this means that you are welcome to continue to get 30 days at a time(locally) but at a higher price. They will usually charge your copay plus a fee. This fee could be in the form of a flat fee each time or a percentage.

Remember that every plan is different and it is good to scan over your benefits booklet or call your prescription benefit manager to determine if this kind of penalty will affect you. Depending on the amount of the penalty, it may make a significant different on the money in your pocket.

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Annual Fill Limits

If your plan has an annual fill limit built into it, this will again affect where you go to get your prescription. It's a different way to get you to get 90 days supply on your maintenance medications. Keep in mind that most plans make it more cost effective to get 90 days supply than 30 days.

An annual fill limit is the amount of times your prescription plan will allow you fill at a local pharmacy. It is important to know if this is something that will affect you, so that you don't go to the pharmacy and get turned away. If your prescription plan has a mail order option for 90 day supplies, its possible that you have an annual fill limit and you should call your prescription benefit manager to check.

There's no standard on how many fills are allowed, but it boils down to a cut and dried result. Once you reach your limit, you are required to get 90 days supply to get coverage on your prescription.

It is not fun when you have three pills left and you didn't know about your annual fill limit. So be prepared and make sure you know your plan restrictions.


Rachael Fields (author) from KC, MO on March 01, 2011:

Hi there, Jen. I appreciate your reading and commenting on this. I completely understand your concern about generic meds and changing to them in certain instances. What I will tell you is that in most cases, the DAW penalty is issued, because there are multiple manufacturers that make the generic, in that case, they want you to find a generic manufacturer that works for you.

Most pharmacies will special order the generic manufacturer that works for you, so that your concern about switching generic manufacturers would be a non-issue. All you have to do, is have your doctor write on the prescription that you need 'X' manufacturer only.

I am not at work right now, so I can't look up the manufacturers of the lansoprazole that you reference here, but I would suggest contacting your prescription benefits manager and ask if there are multiple manufacturers. If your rx plan is insisting on the generic and DAW penalty when there is only one manufacturer, that really does suck for you.

Also, there are some plans that give the penalty for DAW, only if the patient requests brand only, but if the MD requests Brand only, there is no penalty. If you haven't already, I would call your PBM and ask if there is a distinction on that as well.

Every generic works differently in every person's body. So, I can see how one manufacturer's buffers and fillers would effect your body when another's doesn't. I understand where you are coming from on that. With regards to Synthroid, our company doesn't dispense the generic Synthroid when we send it to members through mail order, so I do know there is likely a difference on that. Depending on your plan and your PBM, you may want to see if there are options available for that drug in particular.

I know you are not registered here, so you may not see this comment, but I am glad that you did in fact comment, and I hope you will come back and check for a response, since I have no way to get in touch with you. I hope this helps you better understand your options. :)

Jen on February 28, 2011:

I realize I have no idea how old this post is but I was looking for information on DAW Penalties and came across it.

I have no problems with "Step Up Therapy" when it comes to medications. Antibiotics and other short-term drugs should be fine in the generic format. For new medications, starting with the cheapest form of the medication and increasing cost to the prescription company and the patient is fine.

The problem with prescription companies forcing people to go to generic medications is with maintenance medications that they are already on. Your post used Coumadin and Warfarin for the example. Well, when the copyright was lifted on the Coumadin, the manufacturer didn't post the recipe (formula) for everyone to use. The other manufacturers try to imitate the formula as best they can. This can mean that their drug is not as potent as the brand name. Pharmacies order from whichever manufacturer provides the best price and do not always use the same manufacturer. Therefore, one month, your Warfarin is from Manufacturer X and the next it's from Manufacturer D. This instability in manufacturers can cause a variance in the medication levels you actually receive and, ultimately, in your body's reaction to the medication.

If you've already been on maintenance medications (in many cases for years), prescription companies are now forcing patients to step down and go backwards in their maintenance drugs before they can "Step Up" again. Does anyone else see anything wrong with this? This includes all medications (including allergy meds which change regularly as a person's body develops a tolerance for the medication) and is not restricted to age (so, if you have medication that is working for your young child or your elderly parent, you may have to back up in their drug therapy and keep your fingers crossed that they don't have a problem with the cheaper drugs.)

There was a lawsuit filed by physicians against the pharmaceutical companies a few years back regarding thyroid hormone replacement drugs. Research had shown that quality of the generic drugs were not consistent enough and were not potent enough to match the effectiveness of brand names drugs. The physicians won their case so why are the prescription companies still forcing generic drugs for maintenance meds? For example, on 150 mcg generic Synthroid, my TSH was registering a 3.39 on which is in the "normal" range. Because my symptoms had not abated, my doctor put me on brand name Synthroid and my TSH came back at .59. My 30mg Prevacid has a generic that I have been trying for 6mos because my insurance wouldn't cover the brand name. The problem is that the generic is not as good as the brand name and I am having to supplement the medication with Tums 3-4 times a week. I'd go back to the brand name 30mg Prevacid but it now subject to the DAW Penalty and will cost me $385/3mos because there's a generic available. I can get it cheaper, over the counter, and just take double the OTC meds (which are only 15mg) so why should I use the prescription service?

If generic maintenance meds were just as good as the brand name, my TSH should have remained at 3.39 and I shouldn't have needed Tums.

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