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What is a Formulary & Why is it Important?

Each Medicare prescription drug plan has it’s own list of covered drugs called a formulary. All formularies are similar because they are based on the same federal guidelines, however they may not include the exact same medications. The federal government requires the plans to include most of the types of drugs used by Medicare beneficiaries. The difference in the drug formularies will be important to you because you will want to be certain that the prescription drugs you take will be on the plan’s list you are planning to enroll in. We break it all down here. 

The purpose of creating a formulary is to identify the medications that are both medically appropriate and cost effective to serve plan members. Formularies include both brand name and generic drugs. Many Medicare drug plans, and Medicare Advantage plans place drugs into different “tiers” on their formularies. A tiered formulary divides drugs into different groups, primarily based on their cost. A plan’s formulary may have up to 6 tiers. 

The plan(s) decide which drugs on its formulary go into which tiers. Generally the lowest tier drugs are the ones with the lowest cost, and the highest tier numbers have the higher cost. Plans negotiate their pricing with the drug companies. Medicare drug plans have the ability to make some changes to its formulary during the year, but it has to be within the guidelines set by Medicare. If the changes involve a medication you are currently taking, your plan must do one of the following:

  • Provide you written notice at least 60 days prior to the date the change becomes effective
  • At the time you request a refill, you must be provided with written notice of the change and a 60 day supply of the drug under the same plan rules before the change.

Typically plan members pay a copay or coinsurance each time they have a prescription filled, some plans will have an annual deductible. How much you will pay depends on the plan you choose. The same prescription medication can be on the same formulary tier in two different plans, and you still might pay more for that drug on one plan compared to another. That is why whether you get your prescription drug coverage through a Medicare Advantage plan or a stand alone Part D prescription drug plan, it is important to do do your homework to make sure that are enrolling in the right plan for you. 

Note from Medicare.gov:

Starting in 2017, almost all prescribers need to be enrolled in Medicare or have an “opt-out” request on file with Medicare for your Medicare drug plan to cover your prescriptions. If your prescriber isn’t enrolled and hasn’t “opted-out,” you’ll still be able to get a 3-month provisional fill of your prescription. This will give your prescriber time to enroll, or you time to find a new prescriber who’s enrolled or has opted-out. Contact your plan or your prescriber’s for more information.

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