Drug formularies are pre-approved lists of drugs that aim to provide high-quality, cost-effective care for the patient. Formularies vary between different insurance plans and affect drug coverage and what each drug costs. This financial incentive encourages prescribers to use the most effective drug at the lowest cost. Health plans most often contract with a pharmacy benefit manager (PBM), who acts as the middleman between pharmaceutical manufacturers and pharmacies, to help create the drug formulary. A Pharmacy and Therapeutics Committee is responsible for the formulary design. This committee, composed of pharmacists and doctors, decides on various utilization protocols such as prior authorization criteria, mail-order eligibility, and coverage restrictions.
If you frequently access medications for a health condition, it is important to educate yourself on the drug formulary for your insurance plans to empower your decision-making.
Drug formularies are often tiered. Drugs on the lower tiers have the lowest co-pays — this is the out-of-pocket cost you pay every time you refill your drug. They also tend to be generic drugs and do not need prior authorization, which is the process in which the insurer must approve the drug before it’s dispensed to you. Drugs on higher tiers have higher co-pays or coinsurance (a percentage of the cost of the medication) and may be brand-name drugs that require prior authorization.
If you have been or will soon be accessing prescription drugs, it may benefit you to learn about your plan’s utilization protocols. You may want to ask: “What is my cost-sharing responsibility according to which tier my drug is in? Are there any drug coupons and/or assistance programs from the pharmaceutical company? Is my provider aware of my plan’s drug formulary so I do not get prescribed a drug that will be costly?”
If coverage for your drug is not approved, it may be because other, less costly medications need to be tried before your plan will cover that medication. It is helpful to call your insurer to learn which medications need to be tried first. If you have already tried those medications, or your prescriber has clinical reasons that you can’t try those medications, most prescribers are comfortable with appealing these denials.
If your drug is not on your health plan’s drug formulary, which means it is not covered at all by your plan, you can take advantage of your plan’s appeals process. Your prescriber may need to request an exception for the drug’s coverage. This often occurs for medications that were recently removed from a plan’s formulary or when there are no alternatives on the formulary that work for your health condition.
Currently, prescription drug coverage is an essential health benefit under the Affordable Care Act and must be included in all individual and small group health plans. However, at the end of the day, it is important to carefully consider your plan’s formulary and choose the plan that covers your medications.
Learn More:
Understanding Your Health Plan Drug Formulary | Verywell Health
A Consumer Guide to Drug Formularies: Understanding the Fundamentals of Behavioral Health Medications | Parity Track
Filing a Formulary Exception | Patient Advocate Foundation
Last Revised June 27th, 2022
