What a formulary is, how it works, and what to do when your medication is removed or moved to a higher tier — without anything changing about your health.
| Tier | Drug Type | Your Cost Share |
|---|---|---|
| Tier 1 | Generic drugs | Lowest — typically $5–$15 copay |
| Tier 2 | Preferred brand-name drugs | Moderate — typically $30–$60 copay |
| Tier 3 | Non-preferred brand-name drugs | Higher — typically $60–$100+ copay |
| Tier 4–5 | Specialty drugs | Highest — often 20–33% coinsurance, prior auth required |
The specific tiers, the drugs on each tier, and the cost share amounts vary by plan and change every year during the annual formulary update cycle.
Most people know that formularies change annually. What many do not know is that formularies can also change mid-year, after your plan year has already started. Under federal law, insurers cannot remove a drug from the formulary mid-year for someone actively taking it for a chronic or long-term condition without 60 days advance notice. For Medicare Part D plans specifically, CMS rules prohibit most mid-year changes that negatively affect current enrollees.
Your PBM builds the formulary for your plan. The primary driver of formulary placement is rebates — financial payments that drug manufacturers make to PBMs in exchange for favorable positioning. A drug with a higher rebate may be placed on a lower tier than a clinically equivalent drug with a smaller rebate, even if the higher-rebate drug is more expensive to you. The change to your coverage was financial, not clinical.
