What Is a Formulary?
A formulary is a list of prescription drugs that are covered by a Medicare drug plan, either a standalone Part D plan or the prescription drug component of a Medicare Advantage plan. Every Part D plan and every Medicare Advantage plan with drug coverage (MAPD) has its own unique formulary. No two plans are required to cover exactly the same drugs, though CMS requires all Part D formularies to cover at least two drugs in each therapeutic category and all drugs in six protected classes (immunosuppressants, antidepressants, antipsychotics, anticonvulsants, antiretrovirals, and antineoplastics).
The formulary is one of the most critical elements to evaluate when choosing a drug plan. A plan with a low premium that does not cover your medications will cost you far more than a plan with a higher premium that covers them on a low tier. Premium shopping without formulary verification is one of the most common and most expensive Part D mistakes.
How Drug Tiers Work
Most Part D formularies organize drugs into tiers, with each tier having a different cost-sharing structure. A typical tier structure looks like this:
- Tier 1 (Preferred Generics): The lowest cost tier. Generic drugs that the plan prefers. Copays are typically $0 to $5.
- Tier 2 (Generics): Non-preferred generics or other low-cost generics. Copays are typically $10 to $20.
- Tier 3 (Preferred Brand): Preferred brand-name drugs. Copays are typically $35 to $55.
- Tier 4 (Non-Preferred Brand): Brand-name drugs the plan does not prefer. Higher copays, often $75 to $100 or more.
- Tier 5 (Specialty Drugs): High-cost biologics, specialty injectables, and other expensive medications. Cost-sharing is often a percentage (coinsurance) rather than a flat copay, and can be 25% to 33% of the drug's cost.
Where your drug lands on the formulary tier significantly affects your monthly out-of-pocket drug costs. A medication you take daily on Tier 1 might cost you $5 per month. The same drug on Tier 4 at a different plan might cost you $90 per month. Over a year, that is a $1,020 difference per medication.
Formularies Change Every January 1
This is the fact that catches people off guard every year. Formularies are not static. Every December 31, the formulary you relied on all year expires. January 1 brings a new formulary. Your medications can be:
- Moved to a higher tier (costing you more)
- Subject to new restrictions (prior authorization, step therapy, or quantity limits)
- Removed from the formulary entirely (no longer covered at all)
- Moved to a lower tier (a good change, but not guaranteed)
The Annual Notice of Change (ANOC) you receive each September will list any formulary changes. But reviewing the full formulary for your specific medications against competing plan formularies during AEP (October 15 to December 7) is the most thorough approach.
How to Check Whether Your Drugs Are Covered
The most effective way to compare drug coverage is to use the Medicare Plan Finder at Medicare.gov. Enter your ZIP code, indicate that you want drug coverage, and enter each of your medications (drug name, dosage, frequency). The tool calculates your estimated annual drug costs under each available plan, including premiums, deductibles, and copays, so you can compare total annual drug costs rather than just plan premiums.
When using the Plan Finder, use the exact drug name and dosage you currently take. Generic and brand versions are listed separately and may be on different tiers. Also specify your preferred pharmacy, because preferred pharmacy networks (sometimes called preferred cost-sharing pharmacies) can significantly reduce your Tier 1 and Tier 2 copays.
Formulary Exceptions: When Your Drug Is Not Covered
If a drug you need is not on your plan's formulary, or if your drug is on the formulary but you believe a tier exception is appropriate, you can request a formulary exception. Your prescribing physician must submit a written statement explaining why the non-covered drug is medically necessary and why covered alternatives are not appropriate for you. The plan must respond within 72 hours for standard requests (24 hours for expedited requests). If the exception is approved, the plan covers the drug at a specified cost-sharing level. If denied, you have the right to appeal.
Call Insurance Innovators LLC at (530) 395-5309 to get help comparing formularies for your specific medication list before AEP ends each year. Choosing the right Part D plan based on your actual drugs can save you hundreds or thousands of dollars annually.