Making Sense of Medicare Part D – Drug Plan Formularies

Formularies are one of the most confusing parts of the new Medicare Prescription Drug Plan. The best plan for you depends on your drug use and the coverage provided by each plan. It is important that Medicare-eligible people understand the formularies in order to choose the best plan for them.

What is a formulary exactly?

A formulary is a list that lists all prescription drugs that Medicare prescribes to its beneficiaries. Some plans limit prescriptions to the ones on the formulary, while others provide prescriptions that are not on the formulary depending on the level of coverage chosen by the beneficiary. The formulary contains drugs that have been proven to be both cost-effective and medically beneficial. The formularies contain drugs that insurance companies can negotiate the best prices on because they have the ability to negotiate with drug companies under Medicare Part A.

The basic idea is that the insurance companies that offer the plans have a Pharmacy & Therapeutics Committee that decides which drugs they will include in their formulary. The new Medicare Prescription Drug Plan has a national formulary coverage standard which all insurance providers must adhere to when creating their formularies. They must offer a standard level of coverage for certain diseases/health conditions. These plans must include coverage for a minimum number of drugs that affect seniors’ health. Medicare-eligible people need to know if these plans will cover drugs they’ve been prescribed by their doctor and have taken for a while.

Medicare Part D beneficiaries need to be aware of one thing. After a Medicare PartD beneficiary selects a plan, they are “locked into” that plan for the entire year. Even though the beneficiary did all the research necessary to find the best plan, the insurance company has the option to change which drugs are covered by their formulary (with a 60-day warning period).

We now know what a Formulary is. The next question is “What are the “Tiers” that certain plans have in their formularies?”

Plans with tiers will typically have three tiers.

Prescription drug products fall into one of three categories within a three-tiered formulary. They are classified as Tier 1, Tier 2, or Tier 3. Each Tier has a co-payment amount.

What is a copayment?

A co-payment, a cost-sharing agreement under which a beneficiary must pay a specific dollar amount for prescription drugs, is called a co-payment. A co-payment is simply a fixed amount that a beneficiary must pay each 30 day supply of a drug within a Tier.

Tier 1 is the lowest level of co-payment and often includes generic drugs.

Tier 2 is the middle-range copay level. It usually includes “Preferred” brand names.

Tier 3 is the highest level of co-payment and contains more expensive, innovative and newer brand names. These Tier 3 medications can only be received by beneficiaries who have met certain clinical restrictions. Tier 2 drugs may also have such restrictions. These restrictions include Prior Authorizations, Quantity Limits, and Step Therapy.

What is Quantity Limits (QL), Prior Authorizations (PA) or Step Therapy (ST).

Quantity Limit (QL), which means that an insurance company will only pay a certain amount of a drug within a specified time period, is also known as the Quantity Limit. In this example, you would only be allowed to take 10 tablets in a 30-day period. You will be responsible for paying the product if you need more than this quantity. Migraine medications are a good example of a situation where there is a limit to the quantity. If the prescribing doctor can justify medical necessity, exceptions may be made to daily or established quantity limits.

Prior authorization is the process of getting coverage approval for a specific medication. The medication will not be covered if the prior authorization is not obtained. Nurse reviewers and other authorized personnel from the insurance company issue authorizations. They review all documentation and doctor orders to verify that the medication is medically necessary. To determine whether or not the medication will be approved, a protocol or standard is applied.

Step Therapy refers to the process of starting drug therapy for a medical condition using the least expensive and most effective drug therapy. Then, if necessary, you can move on to more expensive or risky therapies. These are intended to reduce costs and minimize risk. Step therapy is also known as step protocol. Step Therapy can require that the beneficiary use a “first line” drug before authorization for a more expensive “second-line drug”. An individual might be required to use generic ibuprofen for pain relief from arthritis before being given Celebrex brand name.

Because of the complex formularies in many Medicare Part D plans it is crucial that beneficiaries know which Medicare Part D plan they are enrolled in. The physician will be able to work within the limitations of the formulary to ensure the beneficiary receives the most effective and appropriate treatment.

Medicare Part D beneficiaries should be aware that buying medications from a licensed Canadian pharmacy is a great alternative to paying the U.S. pharmacy prices. After they reach the “doughnut hole”, a lot of people will be able to order their medication from a Canadian pharmacy. The gap in coverage is at $2250 per year. Beneficiaries are responsible for all drug costs up to $5100. They may be able to save even more money by ordering their medication from Canada, rather than buying them through Medicare.

Medicare Part D beneficiaries need to understand the formulary of their plan and keep current with notices of any changes. They may not be able to access their medication next time they visit their pharmacy if they don’t keep up with the changes. The information provided will help a Medicare beneficiary choose the best plan for them. Seniors can save a lot of money by combining Medicare Part D coverage with Canadian pharmacy savings. These people should be able save a lot.