Your Prescription Drug Formulary

Many people rely on prescription medications to manage their health. But month-long supplies of medication can be very costly.

That’s where prescription drug coverage comes in. Typically, health insurance plans cover a set of prescription drugs, and require only a copayment to get the medication you need.

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Before you buy a prescription drug plan, you need to make sure the medications you need are covered by it. You can find this out by referring to a plan’s formulary — a big list of all the drugs a plan will cover.

How Insurers Categorize Drugs

Insurance companies usually put a covered prescription drug in one of four categories. Those categories are then split up into separate “tiers” of cost — starting with first tier drugs that have the lowest copayment.

Here are the different tiers of prescription drug coverage:

  • Tier One: Generic drugs

    Generic drugs are lower-cost versions of brand name drugs. They contain the same ingredients as brand name drugs, are just as safe and effective, and are approved by the FDA. Generic drugs don’t require expensive research to create, and the companies that make them usually don’t spend money on advertising. That’s why they cost much less than their brand-name counterparts.

  • Tier Two: Preferred brand name drugs

    Drugs that fall under the Tier Two category include brand name medications with a less expensive generic equivalent. Tier Two drugs are more commonly used for medical treatment. Tier Two drugs also have higher copayments than generics.

  • Tier Three: Non-preferred brand name drugs

    Non-preferred brand name drugs have the highest copayments. Drugs in this category may have Tier One or Tier Two alternatives, and are typically less commonly used in treatment.

  • Tier Four: Specialty drugs

    Tier Four drugs, also with the highest copayments, include medication that requires special dosage and treatment. Many times, these specialty drugs are also closely managed and monitored by a health care professional.

If you ever have questions of which drugs are covered under your plan, check your plan’s drug formulary. And if you’re thinking about switching to a generic drug, make sure you ask your doctor.