Prescription drug plans: 4 tier pricing tips to help you choose

How much will you have to pay for medication? It depends on your prescription drug plan and tier pricing.

You’ve probably noticed some prescription drugs cost more than others…sometimes a lot more. Ever wondered why?

It may have to do with your prescription drug plan’s tier pricing.¹

In this article, you’ll learn…

• What a prescription drug tier pricing plan is
  Why and how insurance companies use tier pricing
  How to use tier pricing to save money on prescription drugs

These 4 tips about prescription drug plans and tier pricing can help you save on medications.

1. Check your plan’s drug formulary

What’s a drug formulary? It’s a list of all the prescription drugs your plan covers.²

If the medication your doctor prescribes is on your plan’s drug formulary, you typically won’t have to pay full price for the drug.

What happens if the medication you need isn’t part of your prescription drug plan?

• When you’ll save money: A prescription drug plan will usually cover more of the costs of a tier 1 generic prescription. This means tier 1 prescriptions will usually have lower copays and coinsurance amounts.
• When you’ll pay more: On the other hand, tier 4 specialty drugs will have the highest copays or coinsurance amounts.

Again, each drug plan is unique and may not include each of these tiers. Check your individual policy for exact tiers and pricing.

2. Check tier pricing for prescription drug coverage

Each prescription drug plan also uses tier pricing to classify drugs based on a variety of factors such as:³

• Cost of the medication
  Cost based on similar drugs to treat the condition
  Availability
  Clinical effectiveness, frequency of use for standard care, delivery, storage and other factors

A drug tier determines the level of coverage a prescription drug plan will offer for specific types of medications.

Most prescription drug plans use a three-tier or four-tier system to classify prescription drugs like this:³

Tier 1	Generics. Usually the least expensive.
Tier 2	Brand-name prescription drugs. Preferred by the insurance company, like an in-network provider. Costs less than non-preferred.
Tier 3	Brand-name prescription drugs. NOT preferred by the insurance company, like an out-of-network provider. Costs more than preferred.
Tier 4	Specialty drugs (like for chemotherapy). Usually the most expensive.

How much will your prescription drugs cost?

It depends on the tier.

• When you’ll save money: A prescription drug plan will usually cover more of the costs of a tier 1 generic prescription. This means tier 1 prescriptions will usually have lower copays and coinsurance amounts.
• When you’ll pay more: On the other hand, tier 4 specialty drugs will have the highest copays or coinsurance amounts.

Again, each drug plan is unique and may not include each of these tiers. Check your individual policy for exact tiers and pricing.

3. Understand the economics of prescription drug plan tiers

Why do prescription drug plans use pricing tiers?

Think about it like this…

Just like health insurance plans use networks, prescription drug plans use formularies and tiers to manage costs.

Prescriptions listed on a plan’s formulary will usually be the most cost-effective medication to treat a certain condition.

Here’s an example. Let’s say:

• Cholesterol Medication A costs $50.
• Cholesterol Medication B, which may have a different but equally effective formula as A, costs $35.
• The result: A drug formulary may only list Cholesterol Medication B because it treats the same condition at a lower cost.

Make sense? Drug tiers are another form of cost management.

Certain medications cost both you and the insurance company less money:

• A generic drug will usually cost much less than the original brand name equivalent.
• Because of the potential savings, most insurance companies want consumers to use generic and preferred medications.
• In order to promote the use of these less expensive medications, a prescription drug plan may cover a larger portion of the costs for lower tier medications (meaning lower copays and coinsurance for you).⁴

4. Use drug tiers to save money on prescription drugs

Can you use drug tiers to your advantage? Absolutely.

You can use your drug plan’s formulary and tier pricing as a savings tool.

Here’s how:

1. Meet with your primary physician.
2. Discuss any of your current medications, conditions, and prescription drug plan options with your doctor.
3. Ask for the least expensive prescriptions to effectively treat your conditions.

In many cases, Tier 1 prescription drugs that treat the same health conditions are available for less money than higher-tier drugs your doctor originally prescribed.

Want to save on prescription drug costs?

Are you looking for a health insurance plan with prescription coverage for your current medications?

Or maybe you need a prescription drug plan to pair with your Medicare coverage.

We can help. Just give us a call at (800) 827-9990 or talk with a licensed insurance agent in your area.