Drug formulary and tiers: how your plan covers medicines

Updated 2026-10-14 · Reviewed for accuracy by the EKO Labs team. Educational only; not medical advice.

When a doctor prescribes a medicine, your health plan decides how to cover it by checking its formulary: the plan's list of covered prescription drugs, also called a drug list. The formulary tells you whether a medicine is covered, how much you will usually pay compared with other drugs (its tier) and whether there are extra rules, like prior authorization. This guide explains how formularies and tiers work, what Medicare and many other plans must follow, what to do when your medicine is not on the list and how to check a plan before you choose it. It is general information, not legal or medical advice.

What a formulary is

HealthCare.gov defines a formulary as a list of prescription drugs covered by a prescription drug plan or another insurance plan that offers drug benefits. Each plan has its own list, so the same medicine can be covered by one plan and not by another, or sit on a different tier.

The list is not made by the insurance company's sales team. Medicare drug plans must have their formulary developed and reviewed by a pharmacy and therapeutics (P&T) committee in which most members are practicing physicians and/or pharmacists, including independent members without conflicts with the plan or drug makers. The committee must base its decisions on scientific evidence and standards of practice. Plans that must cover essential health benefits (most individual and small-group plans, including Marketplace plans) also need a P&T committee, and from 2026 it must include at least one patient representative.

What plans must cover

• Medicare drug plans (Part D): each drug list must include at least 2 drugs in the most commonly prescribed categories and classes, and most drugs in six protected classes: cancer drugs, HIV/AIDS drugs, antidepressants, antipsychotics, anticonvulsants and immunosuppressants for organ transplants. Plans still choose which specific drugs they offer.
• Plans with essential health benefits: they must cover at least one drug in every United States Pharmacopeia (USP) category and class, or as many drugs as the state's benchmark plan, whichever is greater. They must publish an up-to-date list of covered drugs, with tiers and restrictions, on their public website without asking you to log in or enter a policy number.
• Other plans (for example, many large employer plans) set their own lists. Your plan documents and member services are the best source.

Drug tiers

To lower costs, many plans put the drugs on their list into tiers. Generally, a drug in a lower tier costs you less than a drug in a higher tier. Each plan divides its tiers in its own way. Medicare.gov gives this example of a drug plan's tiers (your plan may be different):

• Tier 1, lowest copayment: most generic prescription drugs.
• Tier 2, medium copayment: preferred brand-name drugs.
• Tier 3, higher copayment: non-preferred brand-name drugs.
• Specialty tier, highest copayment: very high-cost drugs.

Your cost also depends on the pharmacy. Some plans charge less at preferred pharmacies or by mail order, and your deductible may apply first. The plan's Evidence of Coverage explains the exact amounts.

Rules that can come with a covered drug

A medicine can be on the formulary and still have conditions. On a drug list they often appear as codes such as PA, ST or QL:

• Prior authorization (PA): your prescriber must get the plan's approval before the plan pays. Plans may also use it when they cover a drug only for certain conditions and not for others.
• Step therapy (ST): you must first try a less expensive drug on the list, often a generic or a biosimilar, before the plan covers a more expensive one.
• Quantity limits (QL): the plan covers only a certain amount over a period of time, for safety and cost reasons.

Our guide to prior authorization and appeals explains how these requests are sent and how long decisions can take.

If your medicine is not covered or costs too much

You can ask the plan for an exception. In Medicare's words, an exception is when a drug plan decides to cover a drug that is not on its drug list, or to waive a coverage rule. A tiering exception is when the plan agrees to charge a lower amount for a drug on a non-preferred tier.

• You, your representative or your prescriber can ask. Your doctor or other prescriber must give a supporting statement explaining the medical reason, for example that the covered alternatives would not be as effective for you, would cause harmful effects, or both.
• In Medicare Part D, an approved exception keeps working for refills for the rest of the plan year, as long as your prescriber keeps prescribing the drug and it is still considered safe for you.
• Medicare plans may refuse some tiering exceptions: for example, a brand-name drug at a tier that only has generics, and drugs on a specialty tier moving to a non-specialty tier.
• For plans with essential health benefits, the plan must decide a standard exception request within 72 hours, or within 24 hours when your health is at serious risk or you are already in the middle of treatment with the drug. If it says no, you can ask for review by an independent review organization.

When the drug list changes during the year

Medicare drug plans can change their drug list during the year, for example when new drugs or new medical information become available. Medicare rules protect people who already take a drug:

• Before removing a drug, moving it to a higher tier or adding new restrictions, the plan generally must send affected members written notice at least 30 days before the change, or give a month's supply at the next refill along with the notice.
• Some changes can happen right away, for example when a drug is withdrawn from the market, or when the plan adds a new generic or biosimilar on the same or a lower tier with the same or fewer restrictions. You then receive written notice afterward.
• Apart from those immediate changes, plans cannot make these negative changes take effect from the start of Open Enrollment (October 15) until 60 days into the new plan year.
• The written notice must name the drug, explain the change and the reason, list alternatives on the same or a lower tier, and explain how to ask for a coverage decision or exception.

New plan? Ask about a transition fill

If you join a new Medicare drug plan and you take a drug that is not on its list, or that needs prior authorization or step therapy, the plan must have a transition process during your first 90 days. Medicare.gov describes it as a one-time, 30-day supply of a drug you have been taking. The plan must send you a written notice within 3 business days after that fill, so you and your prescriber can switch to a covered drug or ask for an exception.

How to check a plan's formulary

• Find the plan's drug list on its website or in its enrollment materials, and make sure it is the list for the right plan and the right year.
• Search by the exact name, strength and form of each medicine (for example, a pen, a vial or a tablet), and write down its tier and any PA, ST or QL code.
• For Medicare, use the Medicare Plan Finder on Medicare.gov with your drug list, or call 1-800-MEDICARE. Drug lists for next year can change, so compare them during Open Enrollment, from October 15 to December 7.
• Check which pharmacies are in network or preferred, including mail order.
• Keep a copy of the list and any letters from the plan about changes.

Questions to ask your plan

• Is my medicine on your formulary, at this exact strength and form, and on which tier?
• Does it need prior authorization, step therapy or a quantity limit?
• Which covered alternatives are on the same or a lower tier?
• How do my prescriber and I ask for an exception, and how long will a decision take?
• Will you tell me in writing if this drug's coverage changes during the year?

Your doctor decides which medicine is right for you; the formulary only decides how your plan pays for it. Our team can answer questions about your visit or prescription in Portuguese or English by phone.

Sources: HealthCare.gov glossary, Formulary; Medicare.gov, How do drug plans work? and Drug plan rules; 42 CFR 423.120(b) (P&T committee, adequate formulary, transition process), 423.120(e)-(f) (formulary changes and notices) and 423.578 (exceptions process); 45 CFR 156.122 (essential health benefits drug coverage, exception timelines, published formulary). Consulted October 2026 via the eCFR. This guide is general information, not legal or medical advice.