Drug Plan Formulary Tiers Explained – Understanding Your Prescription Cost
If you have either a Part D prescription drug plan or a Medicare Advantage plan that includes drug coverage; you’ve probably heard the term “formulary tiers.” But what exactly are these tiers, and how do they affect what you pay at the pharmacy? In this post “Drug Plan Formulary Tiers Explained” we break it down to provide a better understanding of how drug coverage works and ways to save money.
What Is a Formulary
A formulary is simply a list of prescription drugs that your Medicare drug plan covers. Each plan creates its own formulary and categorizes the drugs into different tiers based on cost and type.
Understanding the Tier System
Most Medicare drug plans divide their formularies into five tiers, though some may have more or less. Here’s a general breakdown:
Tier 1: Preferred Generic Drugs
- These are the lowest-cost medications.
- Usually includes common generic drugs that treat routine health conditions.
- Lowest copayment.
Tier 2: Generic Drugs
- Generic drugs that aren’t in Tier 1 but are still less expensive than brand-name options.
- Slightly higher copayment than Tier 1.
Tier 3: Preferred Brand-Name Drugs
- Brand-name drugs that the plan has negotiated lower prices for.
- These may be more expensive than generics, but cost less than non-preferred brands.
Tier 4: Non-Preferred Drugs
- These can include both brand-name and generic drugs.
- They are more expensive and not favored by your plan.
- Higher copay or coinsurance.
Tier 5: Specialty Drugs
- These are high-cost drugs used to treat complex or chronic conditions such as cancer, multiple sclerosis, or rheumatoid arthritis.
- Usually require prior authorization.
- Highest out-of-pocket cost.
Why Tiers Matter
Your copayment or coinsurance depends on the tier your drug falls into. For example, a Tier 1 medication might cost nothing or just a few dollars, while a Tier 5 drug could cost hundreds, even with insurance.
Knowing your plan’s formulary can help you:
- Choose lower-cost alternatives.
- Talk to your doctor about switching to a lower-tier drug.
- Avoid unexpected expenses.
What If Your Drug Isn’t Covered
If your medication isn’t on your plan’s formulary, you have options:
- Request a formulary exception from your plan.
- Ask your doctor if a similar drug is covered.
- Use a discount program or Canadian pharmacy such as The Canadian Medstore, which offers medications at reduced prices for certain drugs not covered or affordable under your plan.
Watch a quick YouTube video to learn more about the Canadian Medstore
Tips for Managing Costs
- Before you sign up for a plan, contact a local Medicare agent to compare plans to find one that best fits your medication needs and budget.
- Review your plan’s formulary each year during the Annual Enrollment Period (AEP).
- Use preferred pharmacies that may offer lower costs.
- Consider applying for Extra Help if you may qualify based on income.
Understanding how formulary tiers work can help you make smarter choices about your prescriptions and potentially save money. Don’t hesitate to speak with a Medicare advisor or pharmacist if you need help reviewing your options.
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