What does a formulary in a Medicare Part D Prescription Drug Plan mean?
This article was updated on: 07/25/2017
Medicare requires that every private insurance company approved to offer Medicare Part D Prescription Drug Plans provide a certain minimum level of coverage. However, the individual companies have some flexibility in deciding which prescription drugs they will cover and how much they will charge for each. This list of covered prescription drugs and pricing policies is known as a drug formulary, and you should read all plan documents, including the formulary, before you enroll, to be sure the medications you currently use are covered.
Please keep in mind that a plan may change its drug formulary at any time, but Medicare requires that the plan gives you a written notification at least 60 days before the change occurs.
How does a plan decide what’s included in the prescription drug formulary?
Each Medicare Part D Prescription Drug Plan must develop a drug formulary to cover a broad range of the most commonly prescribed medications, including both brand-name and generic formulations, to ensure that people with common conditions can get the treatment they need.
Most plans offer generic prescription drugs at lower prices than brand-name prescription drugs. These generic prescription drug formulary medications, according to the Food and Drug Administration (FDA), must have the “same active ingredient, strength, dosage form, and route of administration, performance characteristics and intended use” as their brand-name counterparts, and must meet the same strict quality guidelines. According to the FDA, generics typically cost up to 85% less than the corresponding brand-name product.
How is medication priced in a drug formulary?
Because each plan is administered by a private insurance company contracted with Medicare, prescription drug formulary pricing is determined by the individual plan.
One of the more common is the tiered approach to formulary prices, in which different types and classes of prescription drugs have different copayments. For example, tier 1, which typically includes mainly generic drugs, would have the lowest copayment, followed by tier 2 for preferred brand-name prescription drugs with a slightly higher copayment. Tier 3 is the most expensive drug formulary tier, which might include the most expensive and unique medications and non-preferred brand-name prescription drugs.
Another approach to cost saving that plans may take is step therapy, in which your doctor must start you on the least expensive generic option available for your condition and evaluate your response to treatment before switching you to a higher-priced prescription medication. Some plans may require you to use preferred pharmacies in order to be covered. Additionally, plans may also place coverage limits on the number of pills or doses you can purchase at one time or over a particular time period.
It’s important to note that if your doctor prescribes a medication not covered on your plan’s formulary, you have the right to request a coverage determination, apply for an exception, or request an appeal. You can also get more information about the appeals by calling Medicare directly at 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. Representatives are available 24 hours a day, seven days a week.
If you’d like more information about Medicare Prescription Drug Plans, I’m happy to answer your questions. To request personalized information via email or schedule a return telephone call, click the appropriate link at the bottom of the page. You can also view plans in your area by clicking the “Compare Plans” button. For immediate assistance, please give me or another eHealth licensed insurance agent a call at 1-844-847-2660 (TTY users can call 711) Monday through Friday, 8AM to 8PM ET.