This is general information, not insurance, medical, legal or financial advice. Drug benefits vary by plan, insurer, employer and location, and plans change their drug lists over time. Do not stop or change a medication without talking to your prescriber.
How the drug benefit is organized
Prescription coverage is often a separate part of a health plan, sometimes run by a pharmacy benefit manager that the insurer or employer hires. Some plans combine medical and drug cost sharing, such as a single deductible. Others keep them apart. You may even have a card for the drug benefit that is distinct from your medical card.
What you pay for a prescription depends mainly on four things: whether the drug is covered, which tier it sits on, whether you have met the deductible, and whether you use an approved pharmacy.
The formulary
A formulary is the plan’s list of covered drugs. Plans build it with the help of committees that weigh effectiveness, safety and cost, so the list generally changes over time. Drugs can be added, removed or moved to a different tier, often at the start of a plan year, though changes can happen at other times.
A drug missing from the formulary may not be covered at all, or may be covered only through an exception process. Reading the current formulary, usually posted on the insurer’s website, is the most reliable way to see where your medication stands. Because the list can change, check it again at each open enrollment and when you start a new plan, especially if you rely on a particular medication. Choosing a plan with a medication in mind is a topic of its own, covered under medication-driven plan choice.
Drug tiers
Most formularies sort drugs into tiers, with cost sharing rising as the tier number rises. A common arrangement looks like this, though names and numbers differ:
- Tier 1: lower-cost generic drugs, usually the lowest copay
- Tier 2: preferred brand-name drugs or some higher-cost generics
- Tier 3: non-preferred brand-name drugs, with a higher copay or coinsurance
- Specialty tier: high-cost drugs for complex conditions, often with coinsurance and sometimes limits on where you can fill them
A hypothetical illustration: a plan might charge $10 for Tier 1, $40 for Tier 2, $80 for Tier 3 and 25 percent for specialty drugs. Real plans will differ. The specifics, including how copay and coinsurance work, appear in your plan’s summary.
Some plans apply the deductible to the drug benefit, which means you could pay the full negotiated price until it is met. Others exempt certain tiers, such as generics, from the deductible. Check which approach applies.
Generics versus brands
A generic drug contains the same active ingredient as a brand-name drug and is generally approved on the basis that it works in the same way. Generics are usually lower priced, and plans typically put them on the lowest tier. When both exist, the plan may prefer the generic and charge more if you choose the brand.
Some plans have a rule that if you choose a brand-name drug when a generic is available, you pay the brand copay plus the price difference. Others may require the generic unless your prescriber documents a reason. Details on potential generic drug savings are worth reading before you decide.
Not every drug has a generic equivalent, and for some conditions prescribers have specific reasons to choose a particular product. Discuss any concerns with your doctor or pharmacist rather than switching on your own.
Prior authorization, step therapy and quantity limits
Plans use several tools to manage drug use and cost:
- Prior authorization: the plan requires approval before it will cover a drug. Your prescriber typically submits information about your diagnosis and history. See the discussion of prior authorization for the broader process.
- Step therapy: the plan asks you to try a lower-cost drug first, and covers the next one only if the first does not work or is unsuitable. The logic behind step therapy is a topic of its own.
- Quantity limits: the plan covers only a set amount over a given time, such as a 30-day supply.
These rules often rest on the plan’s judgment about medical necessity. If your prescriber believes a drug is needed despite the rule, they can usually request an exception and provide supporting information. Approval is not guaranteed. If the request is denied, the denial letter should explain the reason and how to appeal, and a claim appeal or external review may be available.
Pharmacies, mail order and supply length
Plans often have preferred pharmacies, and costs may be lower there. Some plans offer mail-order for maintenance medications at a lower price per fill, sometimes with a 90-day supply. Specialty drugs may have to come from a specific pharmacy.
Filling a prescription outside the plan’s pharmacy network could mean you pay the full price, or a higher share. If you pay cash at a pharmacy because of a discount program, the amount may not count toward your deductible. Ask whether it does under your plan.
When a drug is not covered or too costly
If a medication is not covered or is costly, there are several things people typically explore, none guaranteed:
- Ask the prescriber whether a covered alternative or generic would be suitable
- Request a formulary exception
- Ask the pharmacist about lower-cost options
- Check manufacturer assistance programs or other programs for eligible patients
- Review whether your health savings account or other tax-advantaged account can be used for the expense
Eligibility for assistance programs varies, and some exclude people with certain kinds of coverage.
Questions to ask before filling
- Is this drug on my formulary, and what tier is it?
- Does it need prior authorization or step therapy?
- Does the deductible apply, and what will I pay today?
- Is there a cheaper therapeutically similar option?
- Is a 90-day or mail-order supply cheaper?
Keep in mind
Drug coverage is detailed and changeable. The formulary, the tier and any approval requirement together determine what you pay. When something is denied or priced higher than expected, ask your prescriber and your insurer, and read your plan documents. Outcomes vary, and a licensed professional can advise on your specific situation.