Money-saving tip: Get to know your health plan’s drug formulary

When it comes to planning for your health care expenses, you might be familiar with things like copays and deductibles. But there’s another, less familiar, aspect of your coverage that can have a big impact on your prescription costs: Your health plan’s drug formulary.

Knowing what a formulary is, and how it works, can give you peace of mind — and help you save money on medications.

“One of the things I that I help members navigate pretty regularly is the confusion around cost and coverage,” says Kristen Lilley, Regence’s pharmacy consumer experience manager. “People don't understand how to find out whether or not a drug is covered, how to find out what alternatives are covered, and how to see what is less expensive for them.”

First things first: What is a drug formulary?

A drug formulary is simply a list of prescription medications covered by your health insurance plan. Pharmacists spend a lot of time reviewing scientific research and gathering information about how effective and safe different drugs are before including them on the formulary. See how this works.

“The approved list reflects the drugs that are covered at various levels, with certain ones being preferred for reasons of safety, efficacy or cost,” says pharmacist Noelle Redmond, Regence’s assistant director of clinical pharmacy services.

The list can include name-brand and generic drugs. If a medication isn’t on the list, it’s considered “nonformulary,” which usually means higher out-of-pocket costs or no coverage.

How to navigate a drug formulary’s different levels

Formularies generally use a tiered system to set the cost of medications for your health plan. The system categorizes drugs into different levels based on the type of medication and its overall value.

There can be three to six tiers in a health plan’s formulary, though four is a common structure. Your cost-sharing responsibility (copay or coinsurance) rises with each tier. This system encourages the use of the highest value and equally or more effective medications when possible, which helps lower the overall cost of health care. As Redmond and Lilley note, it’s one of the ways your health plan aims to balance its members’ individual needs and those of the population as a whole, so that premiums don’t rise too fast.

“Our unofficial motto is that we want the right patient to have the right drug at the right time and at the best possible price — because the least effective medication is the one they can't afford to fill,” Redmond says.

In general:

• Tier 1 includes generic drugs and has the lowest cost-sharing.
• Tier 2 includes preferred brand-name drugs and has mid-level cost-sharing. These types of medications may not have a generic equivalent but are cost-effective.
• Tier 3 includes nonpreferred brand-name drugs with higher cost-sharing.
• Tier 4: If applicable, this level may include specialty medications that have the highest level of cost-sharing.

7 ways to get more bang for your prescription buck

You can lower your expenses at the pharmacy counter by applying what you know about drug formularies — and by talking to your doctor about which meds are best for your health and your household budget.

These tips can help:

• Before starting new meds, check with your health plan to see what tier the medication is in and how much of the cost you’ll be expected to cover. You can often find this information on their website, or by calling member services.
• If your doctor prescribes a drug that’s in a higher tier, see if they can find an alternative that’s as effective but in a lower tier.
• If there’s a generic version of your medication available, ask your doctor to prescribe it since it’s likely to be in the lowest tier.
• If you take a daily medication, see if it’s possible to get your prescription written for a 90-day supply. This may help lower your out-of-pocket costs and it means you can spend less time waiting on line at the pharmacy.
• If you’re prescribed a name brand, check the manufacturer’s website or talk to your pharmacist about discounts. Many drug makers offer rebates or patient assistance programs.
• Try using a mail-order pharmacy for meds that you refill often. Your cost-sharing may be lower this way.
• Prices can vary a lot, even for the same medication. To see the estimated price of your prescription, you can use Regence’s online tool by signing in to regence.com (Select “Pharmacy,” then “Find a drug” under “Check costs and coverage.”). You can also compare prices at your local pharmacies to find the least expensive option. Websites like GoodRx and SingleCare can help you find deals, too.

Knowledge is the best medicine

When you know which drugs are covered, and at what formulary tier, you’ll be able to avoid surprises, better advocate for your prescription needs, and navigate the health care system more effectively.

Still have questions? Get answers at any time through the Ask a Pharmacist tool in your regence.com account or by calling the number on the back of your member ID card

Jillian Cohan Martin is a journalist and content strategist based in Portland, Oregon.