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What is a drug formulary? | Drug tier list | Who creates formularies? | Finding your formulary | Restrictions | Non-formulary drugs | Choosing the right plan
You might have enrolled in a new health insurance plan or are reviewing your current plan after being prescribed a new medication. You might be wondering about what’s covered—especially when it comes to prescription drugs. Fortunately, it doesn’t have to be difficult or confusing to figure out your drug formulary. Here’s what you need to know.
What is a formulary?
A drug formulary is a list of preferred drugs that your health insurance plan covers. This list can vary depending on the insurance plan you have. Preferred medications are chosen based on their safety, effectiveness, and cost. Non-preferred medications are not covered under the drug formulary, or they may be more expensive than preferred medications.
Your health insurance plan creates a drug formulary to provide you access to the safest, most effective treatments. That way you can get your medications at a reasonable price and your insurance company can save money too. In order to be included on the drug formulary, a medication generally needs to be:
- FDA-approved
- Proven as safe and effective according to credible, published studies
- Effective at providing better outcomes than other related drugs
- More cost-effective than other related drugs
The formulary includes generic and brand-name medications that are grouped according to their drug class. For example, the medication formulary will list preferred blood-pressure, cholesterol, or pain medications. These medications are further grouped into different tiers that determine how much the insurance plan will cover, or whether there will be any coverage at all.
If your medication is not covered, you can work with your healthcare to find an alternative solution. You can also request an exception from your insurance plan.
Drug tier list
Your health insurance plan creates a drug tier list to show drug costs and insurance coverage. Your copay or coinsurance payment will depend on the level, or tier, that drug falls into. The higher the drug tier, the higher the cost of the drug.
Some insurance plans have a formulary with three tiers, but most formularies include four or five tiers. Drugs on Tier 1 consist of the cheapest generic medications while drugs on Tier 5 consist of the most expensive, specialty drugs. The placement of drugs on these tiers can depend on the indicated use, strength, and type of drug.
A four or five drug tier list could like something like this:
- Tier 1: Low-cost, preferred generics
- Tier 2: Non-preferred generics or preferred brand medications
- Tier 3: Preferred and non-preferred brand medications, plus higher-cost, non-preferred generics
- Tier 4: Non-preferred brand medications and the highest-cost, non-preferred generics
- Tier 5: Highest-cost drugs, including specialty drugs
Newer, experimental drugs are often placed on higher drug tiers. Drugs on the highest tiers may have low-cost, effective alternatives on the lowest tiers and are therefore not preferred. The highest tiers also include specialty drugs that require specific conditions for dispensing.
Your insurance plan will provide you with a range of potential copays according to each tier. Make sure you read over this information to understand your costs. The cost of drugs on Tier 1 could be as low as $0. For high-tier drugs, you may have to pay a coinsurance payment, or a percentage of the drug cost, instead of a copay.
Who creates formularies?
The pharmacy and therapeutics (P&T) committee puts together the drug formulary for an insurance plan. This committee consists of healthcare providers with different backgrounds and specialties who review the safety and effectiveness of drugs. They typically choose drugs based on published studies and evidence-based guidelines. The P&T committee may also be contracted with a pharmacy benefit manager (PBM) to manage and update the formulary.
The formulary is usually reviewed and updated every year to ensure the most appropriate drugs are included. A new FDA-approved drug may be added while another drug that is deemed unsafe by the FDA may be removed.
Where can I find my plan’s formulary?
You can usually find your plan’s formulary in your benefits and coverage documents. After purchasing an insurance plan, you should receive an information booklet with the formulary. Your plan should also provide you with potential copay/coinsurance payments based on drug tier. These documents are sometimes located on the plan’s website or app.
If you can’t locate it, call your insurance plan directly. A customer representative can help explain your benefits or guide you to where you can find the formulary.
What are formulary restrictions?
Formulary restrictions are set in place to ensure your doctor is prescribing the safest, most cost-effective drug. Restrictions can help prevent the misuse of medications and manage healthcare costs for everyone.
The most common formulary restriction is a prior authorization. If your prescribed drug has potential safety issues, such as a risk of misuse or abuse, or the drug is available as a low-cost alternative in a different tier, your provider will have to submit a prior authorization. In other words, your provider will have to explain to the insurance company why the prescribed drug is medically necessary for you.
Other restrictions include:
- Step therapy: In order to provide coverage for some drugs, your insurance plan may require that you try other medications first. If those medications don’t work for you, your plan may provide coverage for the higher-cost drug.
- Quantity limits: Your plan may provide limits on how much medication you can purchase at a given time. For example, you may only be allowed a 30-day or 90-day supply at a time for certain medications. This helps ensure you’re taking the medication as prescribed.
What if I’m prescribed a non-formulary drug?
Non-formulary drugs can include over-the-counter medicines, experimental drugs, or certain cosmetic or lifestyle medications like weight-loss drugs. A non-formulary drug is not covered by your insurance plan, and you’ll typically have to pay the full retail price. However, there are exceptions.
Your physician can submit a request to your insurance company to ask for a non-formulary medication to be covered. A team of healthcare providers will then review the request to determine if the drug is medically necessary and effective. They may also determine whether other treatments should be tried first.
If the request is rejected, your provider can submit an appeal with further evidence on why you need the non-formulary medication. If the request is accepted, the medication will be covered, even if it’s not on the formulary.
Choosing the right health insurance plan
It’s recommended that you do your research when choosing the right health insurance plan. The formulary for one plan does not apply to other plans since different plans will have different benefits. You should shop around and check a plan’s formulary to see if it’s right for you.
If you are taking medications for several, pre-existing conditions, it’s in your best interest to find a plan that includes these medications as preferred drugs. It’s especially important to review your Medicare formulary before settling on a Part D plan. If you’re on a fixed income, high prescription costs can become unmanageable quickly. You can save more money if the drug is on a low tier on the formulary.
If you take several non-preferred or specialty drugs, your costs could be high with insurance. In some cases, you may want to use other cost-savings options. For example, a drug discount card from SingleCare can help you save on the cash price of your medications. Compare the cost of your medication with insurance to the cost with SingleCare. You may find that you save more using a prescription discount card instead of insurance, especially for high-cost drugs.
If you have questions about your drug formulary, you should contact your insurance provider for assistance.
