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What Is a Drug Formulary?

If you are choosing a drug plan (if you've just enrolled in Medicare, for example), you need to evaluate the formularies and the related cost structures offered by different companies. Doing so will help you make an informed decision about which prescription drug plan will best meet your needs.
If you have recently gone to work for an employer who offers prescription drug coverage, you need to have a good idea of the drugs on the provider's formulary so you can help your physician avoid prescribing drugs that are more expensive when there are less expensive options available.

  1. Drug List

    • All prescription drug plans have a formulary, a list of the plan's covered medications. The formulary will include both generic and brand-name drugs.
      In addition to their information function, formularies remind you and your doctor that there often are many choices of medications available. It also hopes to guide your selection toward the least expensive alternative, as long as the doctor agrees that it is clinically appropriate.

    Generics

    • The drug company that first creates a new medicine earns a patent that prevents others from duplicating it (allowing the company time to recoup its development costs). Formularies refer to such protected medicines as brand-name drugs.
      Once the patent expires, other companies may create generic equivalents of the drug. However, before a company can take a generic drug to market, the U.S. Food and Drug Administration (FDA) must evaluate it and approve its use. An FDA-approved generic should provide the same results as the brand-name drug.

    Tiered Formularies

    • A three-tiered formulary represents a typical arrangement. Under this formulary organization, you have low co-pays for generic drugs, a bit higher co-pays for brand-name drugs (those still under patent and for which there is no generic) and significantly higher co-pays for "non-preferred" drugs---brand-name drugs purchased in spite of available generics, or new drugs that cost more than alternative therapies.

    Current Data

    • According to the Kaiser Family Foundation, in 2008, 93 percent of workers with prescription benefits were participating in a tiered cost-sharing formula, as defined above. For those workers, the average first-tier drug co-payment was $10, the average second-tier cost was $26 and the average co-payment for third-tier drugs was $46. These are averages. The actual cost of medication varies greatly.

    Why Are Formularies Important?

    • Before you sign up for a program, make sure the drugs you currently take on a regular basis are included in the formulary. Otherwise, you may have to pay their full cost. Even if you already belong to a prescription drug plan, you should look at the available brand-name and prescription drugs to ensure your doctor isn't prescribing a brand-name drug when a generic alternative is available. Ordering generics can save you hundreds of dollars over the course of a year.
      To find out what medicines are on your plan's formulary, you can visit your company's website or call and ask them to send you a copy. Medicare requires that all the companies offering Part D prescription drug plans post their formularies on their websites.

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