Drug Tiers – Formulary Definitions

1. Tier 1 (Generic drugs):
   • These are usually the lowest-cost drugs on a formulary.
   • They are typically generic versions of brand-name drugs and have the same active ingredients.
   • Insurance plans usually encourage patients to use these drugs by making them more affordable.
2. Tier 2 (Preferred brand-name drugs):
   • These are brand-name drugs that are still relatively affordable.
   • They are usually considered “preferred” because the insurance company has negotiated a better price with the drug manufacturer, or they might be drugs that are considered particularly effective.
   • These drugs usually cost more than generics but are often still relatively affordable for patients.
3. Tier 3 (Non-preferred brand-name drugs):
   • These drugs are usually more expensive than those in Tiers 1 and 2.
   • They may include brand-name drugs for which the insurance company hasn’t negotiated any special pricing.
   • They might be more expensive because they are newer, have no generic equivalent, or are considered less cost-effective compared to other treatments for the same condition.
   • Patients may pay significantly more out of pocket for these medications.

Some plans may have additional tiers, such as:

4. Tier 4 (Specialty drugs):
   • This tier may include high-cost medications that are used to treat complex or chronic conditions.
   • They may require special handling, administration, or monitoring.
   • The cost-sharing for these drugs can be quite high, depending on the plan.
5. Tier 5 (Biosimilar or high-cost generics):
   • Some plans might have a specific tier for biosimilars or higher-cost generic drugs.
   • The exact classification and cost structure can vary from plan to plan.

These tiers are used to guide patients and healthcare providers in selecting cost-effective medications. They encourage the use of lower-cost drugs when appropriate, which can help manage healthcare costs for both insurance companies and patients. The specific structure and categorization of drugs into tiers can vary significantly between different insurance plans, so it’s always a good idea for patients to check with their insurance provider to understand how their medications are covered.