What Is a Formulary List?

Certain prescription drugs can be very expensive -- especially if they are new to the market or are a brand-name drug. That's why many health insurance companies have created formulary lists to regulate what drugs they will cover or help pay for. If a member uses a drug not on their health insurance plan's formulary list, they will pay higher out-of-pocket costs. The drugs on a formulary list are approved by the Food and Drug Administration (FDA) for their safety and effectiveness.

Copayments

• The formulary list is tiered into four levels. Tier 1 drugs are usually generics and they usually cost less because more competition for them requires companies to keep costs down. Generics may look different, but they have the same safety and effectiveness as their brand-name counterparts. Tiers 2 and 3 are more expensive, and Tier 4 are the most expensive drugs on the formulary list. The Tiers are created with the help of pharmacists who review each drug's effectiveness. Drugs are also assessed for how often they are prescribed.

Review period

• Most health insurance companies meet regularly to review their formulary list. Typically, they meet quarterly. Members and their doctors are usually notified of the changes each quarter.

Drugs not on the list

• If your doctor prescribes you a drug that is not on your formulary list, you may be required to pay higher out-of-pocket expenses. If you feel that a certain drug should be added to the list, you can appeal your request to your health insurance company and they will consider adding it during the review period.