What Is a Medicare Drug Formulary and How Does It Work?
A Medicare drug formulary is a Medicare Part D plan’s list of covered prescription drugs. Each Medicare drug plan has its own formulary, and the list can affect whether your medication is covered, what you pay, and whether special rules apply. Formularies often group drugs into cost tiers and may include requirements such as prior authorization, step therapy, or quantity limits.
What is a Medicare drug formulary?
A formulary is the drug list used by a Part D plan or a Medicare Advantage plan with drug coverage. It shows which outpatient prescription drugs the plan covers.
Medicare says each plan has its own formulary. That means two plans in the same area may cover different drugs, place the same drug in different cost tiers, or apply different coverage rules.
A formulary may include brand-name drugs, generic drugs, original biological products, and biosimilars. It is not a universal Medicare list that applies to every plan.
How do formulary tiers affect drug costs?
Many Medicare drug plans divide covered drugs into groups called tiers. A tier is a cost category. In general, a drug in a lower tier costs less than a drug in a higher tier, but the exact amount depends on your plan.
Common tier differences may include preferred generic drugs, other generic drugs, preferred brand-name drugs, non-preferred drugs, or specialty drugs. The names and number of tiers can vary by plan.
When comparing plans, it is important to look up each medication by name, dosage, and pharmacy because the same drug can have different costs under different plans.
Do Medicare drug plans have to cover every medication?
No. A Medicare drug plan does not have to cover every prescription drug. However, Medicare requires plans to cover a wide range of drugs used by people with Medicare, including most drugs in certain protected classes, such as drugs used to treat cancer, HIV/AIDS, or depression.
If a plan does not list your exact drug, it may cover a similar drug. Whether that alternative is appropriate depends on your medical condition and your prescriber’s judgment.
Some drugs may be covered under Medicare Part B instead of Part D, depending on how and where they are used. This is one reason it is important to check both the plan formulary and the applicable Medicare coverage rules.
What coverage rules can apply to formulary drugs?
A drug can be on your plan’s formulary and still have rules before the plan pays for it. Common rules include:
- Prior authorization: The plan requires approval before it covers the drug.
- Step therapy: You may need to try a lower-cost drug first before the plan covers a more expensive option.
- Quantity limits: The plan limits how much of a drug it covers over a set period.
These rules are used by plans to manage drug coverage and medical necessity. If a rule is not appropriate for your situation, you or your prescriber may be able to request an exception.
Can a Medicare formulary change during the year?
Yes. A Medicare drug plan can make some changes to its formulary during the year if it follows Medicare guidelines. Changes may happen when new drugs become available, drug therapies change, medical information changes, or certain formulary substitutions are allowed.
A plan may also change how a drug is placed on its formulary, which can affect what you pay. Because formularies can change, it is wise to review your plan’s drug list during the Medicare Open Enrollment Period and whenever your prescriptions change.
What if your drug is not covered or costs too much?
If your drug is not on the formulary, is in a higher-cost tier, or has a coverage rule that does not fit your medical needs, you or your prescriber can ask the plan for an exception. An exception may ask the plan to cover a non-formulary drug, waive a coverage rule, or charge a lower amount for a drug in a non-preferred tier.
Your prescriber generally must provide a supporting statement explaining the medical reason for the request. If your plan denies coverage, you may have appeal rights under Medicare’s drug plan appeals process.
When your drug coverage begins, Medicare says you may get a transition fill, which is a one-time 30-day supply of a drug you have been taking if the plan does not cover it or requires prior authorization or step therapy. This does not mean the drug will continue to be covered without further action.
When Can You Enroll in Medicare Part D?From First Meeting to Medicare Enrollment
We begin by helping you understand how Medicare works and how the different pieces fit together. We walk through Original Medicare, Parts A and B, Medicare Advantage, Medicare Supplement insurance, and Part D prescription drug coverage, including how formularies, drug tiers, and plan rules can affect your costs.
We also explain dental, vision, and hearing coverage, along with other products that may help fill gaps in your healthcare plan. Depending on your needs, that may include short-term in-home healthcare coverage, hospital indemnity insurance, or coverage designed to provide additional financial support following a cancer diagnosis, heart attack, or stroke.
Once you understand the landscape, we move into the planning stage. That is when we review your doctors, hospitals, prescription drugs, current coverage, and other personal details so we can begin evaluating the Medicare plan options that fit your situation.
Official Sources
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What do drug plans cover? | Medicare
Verifies that each Medicare drug plan has its own formulary and must cover a wide range of prescription drugs. -
How do drug plans work? | Medicare
Explains formularies, drug tiers, exceptions, and plan formulary changes during the year. -
Drug plan rules | Medicare
Verifies prior authorization, step therapy, quantity limits, exceptions, and transition fill information. -
Appeals in a Medicare drug plan | Medicare
Explains coverage determinations, exception requests, and Medicare drug plan appeals. -
Prescription drugs (outpatient)
Verifies that Medicare Part D covers many outpatient prescription drugs that Part B does not cover and directs beneficiaries to check the plan formulary. -
Formulary Guidance | CMS
Provides CMS information on Medicare prescription drug formulary policies and CMS review of Part D formularies.
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