Medicare Part D Formulary: How Drug Tiers Affect What You Pay

Every Medicare Part D prescription drug plan maintains a formulary -- a list of covered medications organized into tiers. The tier your drug falls on determines how much you pay. Understanding formulary tiers is essential for choosing the right Part D plan and managing your prescription costs.

A formulary is a plan's list of covered prescription drugs. Part D plans are not required to cover every drug -- they must cover at least two drugs in each therapeutic category, but they have significant flexibility in which specific drugs they include and how they price them.

Before enrolling in any Part D plan, verify that your medications are on the formulary -- and check what tier they are on.

Most Part D plans use a 5-tier structure, though the exact number and names of tiers vary by plan:

Tier 1 -- Preferred Generics

• Lowest cost-sharing
• Typical copay: $0-$5
• Examples: Common generic medications (metformin, lisinopril, atorvastatin)

Tier 2 -- Non-Preferred Generics

• Low cost-sharing
• Typical copay: $5-$15
• Examples: Generic drugs not on the preferred list

Tier 3 -- Preferred Brand-Name Drugs

• Moderate cost-sharing
• Typical copay: $35-$50
• Examples: Brand-name drugs with preferred formulary status

Tier 4 -- Non-Preferred Brand-Name Drugs

• Higher cost-sharing
• Typical copay: $75-$100 or 25-33% coinsurance
• Examples: Brand-name drugs without preferred status

Tier 5 -- Specialty Drugs

• Highest cost-sharing
• Typical coinsurance: 25-33% of drug cost
• Examples: Biologics, cancer drugs, specialty medications (often $500-$5,000+ per month)

1. Go to the plan's website and use the drug search tool
2. Use Medicare Plan Finder at medicare.gov/plan-compare -- enter your medications to see costs under each plan
3. Call the plan's member services line

Check every year -- formularies change annually. A drug that was Tier 2 this year may be Tier 4 next year.

If your medication is not on your plan's formulary, you have several options:

Request a formulary exception: Ask your doctor to submit a formulary exception request explaining why the non-formulary drug is medically necessary. The plan must respond within 72 hours (24 hours for expedited requests).

Request a tier exception: If your drug is on formulary but at a high tier, ask your doctor to request a tier exception -- moving the drug to a lower cost-sharing tier.

Ask about therapeutic alternatives: Your doctor may be able to prescribe a formulary alternative that is clinically equivalent.

Switch plans during AEP: If your current plan doesn't cover your medications affordably, switch to a plan with better formulary coverage during Annual Enrollment Period (October 15-December 7).

Plans can change their formularies mid-year -- but with restrictions:

• Plans cannot remove a drug from formulary mid-year if you are currently taking it (with limited exceptions)
• Plans must provide 60 days' notice before removing a drug or moving it to a higher tier
• If your drug is removed mid-year, you have a Special Enrollment Period to switch plans

In addition to drug tiers, Part D plans designate preferred pharmacies where you pay lower copays. Using a non-preferred pharmacy can significantly increase your costs -- sometimes by $10-$30 per prescription.

Action: When comparing plans, check whether your preferred pharmacy is in the plan's preferred network.

We do not offer every plan available in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.