Making Sense of Medicare Part D – Drug Plan Formularies
by: Jeremy Cockerill
One of the most difficult portions of the new Medicare Prescription Drug Plan to navigate is the various drug plans’ formularies. Selection of a plan is based on what drugs you are on and which plans provide the best coverage for your selected drugs. In order to select the optimal plan for themselves, it is critical that Medicare-eligible individuals understand how these formularies work.
What exactly is a formulary?
A formulary is a list of “covered” prescription drugs that the various Medicare prescription drug plans must provide to their enrollees. Some plans restrict prescriptions to those contained on the formulary and others may also provide non-formulary prescriptions depending on the level of coverage selected by the beneficiary. Drugs contained on the formulary are generally those that are determined to be cost effective and medically effective. However, because of the ability of the insurance providers to negotiate their own “deals” with the drug companies under Medicare Part D, without having to pass the savings on to the consumer, formularies often contain the drugs that these insurance companies are able to negotiate the best pricing on.
Basically, the insurance providers that operate the various plans have a Pharmacy & Therapeutics committee that chooses which drugs they will cover on their formulary and which drugs they will not cover. There is a national formulary coverage standard that the insurance providers must follow when creating their formulary under the new Medicare Prescription Drug Plan. They must provide a certain standard level of drug coverage for particular disease/health condition categories. This means that these plans must cover a certain number of drugs in most disease categories which effect seniors’ health. The big mystery for Medicare-eligible individuals to figure out is, will these plans cover the drugs that they have been prescribed by their physician and that they have been taking for some time.
There is one important catch with Medicare Part D that Medicare beneficiaries must be aware of. Once a Medicare Part D beneficiary chooses a plan they are “locked in” to that plan for the year. Now, even though the beneficiary has done all the research to choose the right plan that covers all of their drugs the insurance companies have the ability to switch which drugs are covered under their formulary (with a 60 day warning period).
Now that we know what a formulary is, the next question to ask is “what are the “Tiers” that some of the various plans have in their formularies?”
Most plans that have tiers will have three tiers.
Within a three-tiered formulary, prescription drug products are categorized as Tier 1, Tier 2 or Tier 3. Each Tier is assigned a specific co-payment amount.
What is a co-payment?
A co-payment is a cost-sharing arrangement under which a beneficiary pays a specified dollar amount for a prescription drug. Basically, a co-payment is a fix amount that a beneficiary must pay for each 30-day supply of a drug they buy within a specified Tier.
Tier 1 is the lowest co-payment level and usually contains generic drugs.
Tier 2 is the mid-range co-payment level and usually contains “Preferred” brand name medications.
Tier 3 is the highest co-payment level and usually contains newer, more innovative and expensive brand name medications. There are often specific clinical restrictions established within a plans formulary for a beneficiary to receive these Tier 3 medications (some Tier 2 drugs may also have these restrictions). These restrictions include Quantity Limits, Prior Authorizations and Step Therapy.
What are Quantity Limits (QL), Prior Authorization (PA) and Step Therapy (ST)?
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Making Sense of Medicare Part D – Drug Plan Formularies
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About The Author
Jeremy Cockerill is a licensed pharmacist and the co-founder and pharmacy manager of UniversalDrugstore.com. Mr. Cockerill graduated from the Faculty of Pharmacy at the University of Manitoba with Honors in 1998. Mr. Cockerill is the recipient of the 2005 Manager of the Year award from the Manitoba Customer Contact Association.
http://www.universaldrugstore.com
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