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`What is a Tiered Formulary and What Does it Mean for Me?
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`Medicare Coverage & Costs, Medicare Tips & Resources | Tue, Nov 08, 2011 @ 09:00 AM
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`What is a Tiered Formulary and What Does it Mean for Me?
`
`Posted by Medicare Made Clear
`
`A formulary is a list of drugs covered by a health plan. The purpose of a formulary is to
`identify medically appropriate and cost effective drug products and therapies that best serve the health interests
`of plan members. Formularies include both brand name and generic drugs, and plans must include choices
`within commonly prescribed drug categories and classes.
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`Argentum Pharmaceuticals LLC v. Cipla Ltd.
`IPR2017-00807
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`What is a Tiered Formulary and What Does it Mean for Me?
`5/26/2017
`Each health plan determines which specific drugs it will include on its formulary. Medicare drug plan formularies
`must include most types of drugs used by Medicare beneficiaries. This is true for both standalone Medicare Part
`D prescription drug plans and Medicare Advantage (Medicare Part C) plans with drug coverage.
`
`Tiered Formularies
`
`Many health plans, including Medicare prescription drug plans and Medicare Advantage plans with drug
`coverage, have tiered formularies. A tiered formulary divides drugs into groups, based primarily on cost. A plan’s
`formulary might have three, four or even five tiers.
`
`Each plan decides which drugs on its formulary go into which tiers. The determination is based on what the plan
`pays for the drug. In general, the lowest-tier drugs are the lowest cost. Plans negotiate pricing with drug
`companies. If a plan negotiates a lower price on a particular drug, then it can place it in a lower tier and pass the
`savings on to its members. Plan formularies list drugs with lower negotiated prices as “preferred” drugs.
`
`The table below is an example of a four-tier formulary structure.
`
`Drug Tier
`
`Type of Drugs Included
`
`Your Cost
`
`Tier 1
`
`Most generic drugs
`
`Lowest copay
`
`Tier 2
`
`Most common brand name
`drugs
`
`Medium copay
`
`Preferred brand name drugs
`
`Some high-cost generic drugs
`
`Tier 3
`
`Non-preferred brand name
`drugs
`
`Highest copay
`
`Tier 4
`
`Unique or very high-cost drugs
`
`Specialty Tier
`
`Why it Matters
`
`Percentage of total drug
`cost, called
`“coinsurance”
`
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`What is a Tiered Formulary and What Does it Mean for Me?
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`Formularies vary. Every plan creates its own formulary structure, decides which drugs it will cover and determines
`which tier a drug is on. One plan may cover a drug that another doesn’t. The same drugs may be on tier 2 in one
`plan’s formulary and on tier 3 in a different plan’s formulary. It’s important to review the formulary, or drug list, to
`see whether the plan you have, or the plan you’re interested in, covers your prescriptions and how much they will
`cost.
`
`Formularies change. New brand name drugs become available. Generic versions of older drugs enter the market.
`New drug pricing is negotiated. Any of a number of things may lead a plan to add or remove a particular drug
`from its formulary or to move it into a different tier. Usually, plans must inform members in advance if a drug is to
`be removed. You can learn about other changes in the plan’s formulary update documents.
`
`Formularies have different pricing. Plan members typically pay a copay or coinsurance each time they fill a
`prescription. How much you pay depends on the plan you have. The same drug can be on the same formulary tier
`in two different plans, and still you might pay more for that drug under one plan than the other.
`
`It’s important to research and compare plans and to consider where your prescription drugs fit in each plan’s
`formulary. It could save you money.
`
`For more information information contact the Medicare helpline 24 hours a day, seven days a week at 1-800-
`MEDICARE (1-800-633-4227), TTY 1-877-486-2048. You can also contact UnitedHealthcare® Medicare Made Clear
`to learn more at 1-877-619-5582, TTY 711, 8 a.m. – 8 p.m. local time, seven days a week.
`
`Resources:
`
`How Medicare Drug Plans use…Formularies, and Common Coverage Rules – Medicare.gov
`
`Things to Think About When You Compare Medicare Drug Coverage – Medicare.gov
`
`Medicare & You 2011 – Medicare.gov
`
` Y0066_111017_154725 File & Use 10292011
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`What is a Tiered Formulary and What Does it Mean for Me?
`©2016 United HealthCare Services, Inc. All rights reserved. No portion of this work may be reproduced or used without express
`written permission of United HealthCare Services, Inc., regardless of commercial or non-commercial nature of the use.
`
`Plans are insured through UnitedHealthcare Insurance Company or one of its affiliated companies. For Medicare Advantage and
`Prescription Drug Plans: A Medicare Advantage organization with a Medicare contract and a Medicare-approved Part D sponsor.
`Enrollment in these plans depends on the plan’s contract renewal with Medicare.
`
`Last updated: 8/10/15 at 11:15 a.m.
`Y0066_150527_123928 Approved
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