Your health insurance plan includes a list called a formulary—the list of drugs it covers. If you’ve ever been surprised by how much it costs to fill a prescription, the drug may not be on your formulary.
The formulary is also called the Preferred Drug List (PDL). At first glance, you might think it would take a decoding ring to figure it out. But knowing your PDL can help you get the medicine you need at the lowest price.
Your plan list is created by a committee of doctors and pharmacists. Louise Norris, a licensed insurance broker and analyst with healthinsurance.org, said the group works together to ensure the safety, effectiveness and overall value of the formulary.
The PDL classifies drugs into tiers three to five based on how much they cost. Norris said Tier 1 drugs are the cheapest and are often generic versions of brand-name drugs that are higher tier and more expensive.
Your insurance plan may not cover all possible medications. This depends on whether your PDL is open or closed.
Have an open formulary, Your health plan covers any drug approved by the FDA. “Every drug imaginable belongs to some tier. The worst-case scenario is that the most expensive drugs are in the highest tier,” said Dr. Michael Botta, co-founder of direct-to-patient healthcare company Sesame.
Many business plans are already open or very close, he said.
With a closed formulary, Botha said, “there are some drugs that don’t fall into any class and therefore aren’t subject to your drug benefit.”
One-third of Americans are on Medicaid, the state-funded health insurance for low-income people, he said. Most of these plans have closed formularies.
Visit your insurance plan’s website and search for it. It may be under a tab such as “Find a Drug” or “Covered Drugs.” The formulary may list drugs:
- alphabetical order
- by level
- According to drug type
- Based on the medical condition they treat
If you can’t find the medication you need, call the number on your insurance card to get information, Botha said.
“You may find that your health plan has an interactive formulary page that shows covered alternatives if your drug is not on the formulary,” Norris says. If your drug is in a higher tier, it may also offer you an alternative to a lower tier, she adds.
A PDL often contains other important information about your coverage, including:
- Prior authorization (PA), or whether your plan requires your prior approval to cover the drug
- Step therapy (ST), which means you try cheaper drugs first to see if they suit your condition
- Quantity Limitation (QL), where a drug is only covered for a certain number of refills or a specific dose per day
Most formularies change at the beginning of each year. Before you order your first refill of the year, check to make sure your drug is still on the list, has been replaced by a generic, or if a new drug you need has been added.
If you’re considering changing your health insurance plan, check to see if all of your family’s medications are on the formulary before making a decision.
Norris said it’s common for Tier 1 drugs to have lower, fixed out-of-pocket costs, but top-tier drugs have coinsurance (you pay a percentage of the cost). To lower your costs, ask your doctor about lower-level medications, if they are available.
You may be wondering whether generic drugs are as good as brand-name drugs. FDA-approved generic drugs have the same ingredients and effects as brand-name generic drugs. They are cheaper because they do not have to repeat expensive efficacy and safety studies. The market is also more competitive as there may be many different generic drugs to choose from.
Make sure you share an up-to-date prescription list with your doctor, especially if you consider cost. Let them know you want the lowest-cost option that meets your needs, Botta suggests.
In some cases, you and your doctor may need to get creative. For example, an extended-release drug may not be covered, while a standard-release version of the same drug is. Your doctor can write a prescription for a covered drug that you can take at different times throughout the day. This can mimic the effects of extended-release medications.
If the drug you need is not on your health plan’s list, your doctor can submit a prescription exception request for you. Norris says you might want to do this for a number of reasons.
- You are allergic to a substitute on the formulary.
- You’ve tried alternatives on PDL, but they don’t work.
- Medicines on the formulary may interact negatively with other medicines you take.
- Prescription drugs may cause problems due to other health conditions you have.
It often takes time for insurance plans to add newly approved drugs to their formularies. If your doctor thinks a brand-new drug is the best or only option for your medical needs and your health plan has not yet started covering the new drug, they can file a prescription exception.
There is no guarantee that your insurance provider will grant a stated exception. If not, there is an appeals process. It started with an internal appeal. If that doesn’t work, you can file an external appeal—an appeal that is reviewed by a third party rather than your health plan.
Botha said it was an uphill battle at times. He recommends visiting drug manufacturers’ websites to look for discounts. Your pharmacist can also suggest ways to save.
