How prescription drug coverage works
Drug formularies, tiers, prior authorization, step therapy, and mail-order pharmacies — the rules that determine what you pay at the counter.
Most health plans bundle prescription coverage with medical, but the rules are different. Drugs are sorted into tiers, may require prior authorization, and often have to come from specific pharmacies. The price you pay depends on the drug's tier, your benefit design, and where you fill it.
Drug tiers
- Tier 1 — Preferred generics. Lowest copay, often $5–$15.
- Tier 2 — Non-preferred generics or preferred brand-name. Mid copay, often $30–$50.
- Tier 3 — Non-preferred brand. Higher copay, often $50–$100 or 20–30% coinsurance.
- Tier 4 (Specialty) — Biologics and high-cost drugs. Usually coinsurance (e.g., 30%) up to a cap.
- Excluded — Drugs not on the formulary at all. You pay full retail.
Common formulary rules
- Prior authorization — Plan must approve before filling. Required for expensive or potentially misused drugs.
- Step therapy — Must try (and fail or have side effects on) a cheaper drug before stepping up.
- Quantity limits — Caps how much you can fill per month (e.g., 30 tablets, 90-day supply maximum).
- Age limits — Some drugs only covered for certain age ranges.
Where to fill prescriptions
- In-network retail pharmacy — Standard 30-day fills. Compare prices between chains; copays are the same but cash prices vary.
- Mail-order pharmacy — 90-day fills, often at lower copays. Best for stable, ongoing medications.
- Specialty pharmacy — Required for Tier 4 specialty drugs (injectables, infusions). Usually a single contracted vendor.
- Preferred retail pharmacy — Some plans have a preferred chain with lower copays.
When the formulary fails you
- Request a formulary exception
Your prescriber can submit a clinical justification asking the plan to cover a non-formulary drug at a tier copay.
- Use a manufacturer copay card or assistance program
Brand-name drugs often have manufacturer coupons that reduce out-of-pocket cost. Check the drug's official website.
- Compare cash price tools
GoodRx, Cost Plus Drugs, and others sometimes beat insurance copays — especially for generic Tier 2 drugs. Compare before filling.
FAQ
- Why did my drug copay go up on January 1?
Formularies are updated annually. A drug can move tiers, get a quantity limit, or be dropped entirely. Plans must notify you in advance, but the change is allowed.
- Is mail-order pharmacy required?
Some plans require it after the third fill of an ongoing medication ('maintenance medications'). Others just offer a discount. Check your plan's pharmacy benefits booklet.
- Does my drug deductible count toward my medical deductible?
Sometimes yes, sometimes no — depending on the plan. HDHP plans typically have a single integrated deductible; many traditional plans have separate Rx and medical deductibles.