What is the formulary in a Medicare Prescription Drug Plan & How Does They Work?
A formulary is the list of generic and brand-name prescription drugs covered by a specific health insurance plan. Non-formulary drugs typically only include brand-name medications and come with high out-of-pocket expenses. Your health plan may only help you pay for the drugs listed on its formulary. It’s their way of providing a wide range of effective medications at the lowest possible cost. Simply put, a formulary is just another name for a health insurance plan drug list. The purpose of a drug formulary is to help manage which drugs care providers can prescribe and that would be covered by a health plan for that specific year. The goal of a formulary is to make sure that the drugs covered by a health plan are safe, effective, and available at a reasonable cost.
Who creates drug formularies?
Health plan formularies are created by a team of medical professionals set up by the plan’s health insurance company. This team would include pharmacists and doctors from various medical areas. This team would then choose which prescription drugs to include on the health plan formulary based on safety, quality, and cost effectiveness. If a prescription is not on your health plan’s formulary, you would probably have to pay for it out of pocket. A health plan may change its formulary drug list from time to time. There are many reasons why they make changes. Some common reasons are that new drugs may become available, there may be changes in treatment or based on new medical information.
How Medicare drug plan formularies may differ
Certain drugs may be covered under Medicare Part B. But Medicare Part B drugs are not drugs you'd usually give to yourself; those are normally administered at a doctor’s office or hospital outpatient facility.
Medicare Part D drug plans and Medicare Advantage (Part C) plans have a medical formulary listing the drugs each plan covers. These formularies include a choice of at least two drugs in the most commonly prescribed categories and classes. This helps make sure that people with various medical conditions can get the prescription drugs they need.
If a prescription is not on your health plan’s formulary, you would probably have to pay for it out of pocket. And paying for prescription drugs can be expensive. That is why it is important to make sure any prescription medicines you need are on the drug formulary before you enroll or switch to a different health care plan.
What is a drug tier?
Your health plan’s formulary is typically divided into four or five categories. These categories are called tiers. Drugs are placed in tiers based on the type of drug: generic, preferred brand, non-preferred brand, and specialty. Typical formulary tiers look like the following:
Tier 1: Tier 1 drugs are usually preferred generics and have the lowest copays.
Tier 2: Tier 2 drugs are usually non-preferred generic drugs and will cost you more than tier 1 medications.
Tier 3: Tier 3 includes preferred brands and some non-preferred generics. Your out-of-pocket price for these drugs will be higher than tiers 1 and 2.
Tier 4: Tier 4 includes non-preferred brands, and some specialty drugs and your cost will be higher than Tier 3.
Tier 5: Tier 5 includes specialty medications that treat rare or serious medical conditions. Tier 5 is your most expensive tier.
Some health plans have more than five tiers and others have only two or three, but generally they all work the same. Drugs in lower tiers will cost less and those in higher tiers will cost more.
My medication is not on my plan’s formulary, what can I do?
Getting your plan to cover a non-formulary drug is easier than you think. Each insurer has an “exceptions process.” You simply need to fill out and mail paperwork or submit a form online. Now the exceptions process may vary from one company to another, but they all have the following in common:
Your healthcare provider must confirm you need the drug they prescribed.
Your doctor must state that your plan’s covered drugs will not treat you as effectively as the prescribed medication.
Your physician believes that your plan’s covered drugs may harm you.
Your plan only covers the drug at a lower dosage that’s not effective for you. If you are overweight or obese, for instance, you may need a higher dose that’s not covered by your plan.
During this appeal process you can ask your health plan about temporary coverage. If your exception is approved for the long term, it most likely will be placed at the highest tier. If your plan says no, don’t worry as the company must explain their decision, and you have the right to appeal that decision.
When searching through your health insurance coverage, it’s important to understand how medication formularies work. Your insurance may only cover drugs listed on its formulary. However, if you are prescribed a non-formulary drug, you may be able to get your insurance plan to cover it through their exceptions process. Just do your homework or give us a call and let one of our representatives help you through the process.