Prescription Pricing Tiers
Medication Pricing
Tiers determine the level of coverage your prescription drug plan offers for a specific type of medication. Many prescription drug plans use a 4-tier system, while some insurers have an additional 5th or even 6th. Your insurer’s formulary and tier system are available on the company website or in the documents you received when you enrolled in your prescription drug plan.
Tier 1 Prescriptions:
This tier is usually the cheapest and generally includes generic medications.
Tier 2 Prescriptions:
This tier includes brand name drugs that are preferred by your health insurance company. Just as your health insurance company provides better coverage for in-network healthcare providers, it provides better coverage for preferred drugs. It can also include more expensive generic medications.
Tier 3 Prescriptions:
This tier includes brand name drugs that are not preferred by your health insurance company. These drugs are still covered, but you will likely pay more out of pocket than you would for a preferred drug.
Tier 4 Prescriptions:
This tier, includes specialty drugs, such as those used for cancer treatment. These drugs have a much higher out-of-pocket cost.
Tier 5 Prescriptions:
This tier, which is not included in all prescription drug plans, includes highest cost specialty drugs.
Tier 6 Prescriptions:
This tier many companies will use and not charge their insureds a copay at all, using a tier-6 medications for “maintenance medication”.
Why Is Tier Pricing Used?
The primary purpose of tier pricing is to help health insurance companies manage their costs. In most cases, the drugs listed on a plan’s formulary are both effective and the most economically priced for treating a condition. To promote the use of generics or more cost-effective brand name drugs, health insurance companies may cover a larger portion of the costs for Tier 1 and Tier 2 drugs.
You must look at your own individual policy.
