Making Sense of Medicare Part D – Drug Plan Formularies

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Title: Making Sense of Medicare Part D – Drug Plan Formularies

Word Count: 1153

Author: Cockerill

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Making Sense of Medicare Part D – Drug Plan Formularies

Copyright 2006 Cockerill

One of the most difficult portions of the new Medicare

Prescription Drug Plan to navigate is the various drug

plans’ formularies. Selection of a plan is based on what

drugs you are on and which plans provide the best coverage

for your selected drugs. In order to select the optimal

plan for themselves, it is critical that Medicare-eligible

individuals understand how these formularies work.

What exactly is a formulary?

A formulary is a list of “covered” prescription drugs that

the various Medicare prescription drug plans must provide

to their enrollees. Some plans restrict prescriptions to

those contained on the formulary and others may also

provide non-formulary prescriptions depending on the level

of coverage selected by the beneficiary. Drugs contained on

the formulary are generally those that are determined to be

cost effective and medically effective. However, because

of the ability of the insurance providers to negotiate

their own “deals” with the drug companies under Medicare

Part D, without having to pass the savings on to the

consumer, formularies often contain the drugs that these

insurance companies are able to negotiate the best pricing

on.

Basically, the insurance providers that operate the various

plans have a Pharmacy & Therapeutics committee that chooses

which drugs they will cover on their formulary and which

drugs they will not cover. There is a national formulary

coverage standard that the insurance providers must follow

when creating their formulary under the new Medicare

Prescription Drug Plan. They must provide a certain

standard level of drug coverage for particular

disease/health condition categories. This means that

these plans must cover a certain number of drugs in most

disease categories which effect seniors’ health. The big

mystery for Medicare-eligible individuals to figure out is,

will these plans cover the drugs that they have been

prescribed by their physician and that they have been

taking for some time.

There is one important catch with Medicare Part D that

Medicare beneficiaries must be aware of. Once a Medicare

Part D beneficiary chooses a plan they are “locked in” to

that plan for the year. Now, even though the beneficiary

has done all the research to choose the right plan that

covers all of their drugs the insurance companies have the

ability to switch which drugs are covered under their

formulary (with a 60 day warning period).

Now that we know what a formulary is, the next question to

ask is “what are the “Tiers” that some of the various plans

have in their formularies?”

Most plans that have tiers will have three tiers.

Within a three-tiered formulary, prescription drug products

are categorized as Tier 1, Tier 2 or Tier 3. Each Tier is

assigned a specific co-payment amount.

What is a co-payment?

A co-payment is a cost-sharing arrangement under which a

beneficiary pays a specified dollar amount for a

prescription drug. Basically, a co-payment is a fix amount

that a beneficiary must pay for each 30-day supply of a

drug they buy within a specified Tier.

Tier 1 is the lowest co-payment level and usually contains

generic drugs.

Tier 2 is the mid-range co-payment level and usually

contains “Preferred” brand name medications.

Tier 3 is the highest co-payment level and usually contains

newer, more innovative and expensive brand name

medications. There are often specific clinical

restrictions established within a plans formulary for a

beneficiary to receive these Tier 3 medications (some Tier

2 drugs may also have these restrictions). These

restrictions include Quantity Limits, Prior Authorizations

and Step Therapy.

What are Quantity Limits (QL), Prior Authorization (PA) and

Step Therapy (ST)?

Quantity Limit (QL) means that the insurance company will

only pay for a set amount of a particular drug within a

given time frame. For example, 10 tablets within a 30 day

period. If you want more than that set quantity you are

responsible to pay for the product. A good example of

where a quantity limit is often implemented is with

migraine medications. Exceptions to established quantity

or days supply limits may be made if the prescribing

physician is able to justify medical necessity.

Prior Authorization is the process of obtaining coverage

approval for a particular medication. Without such prior

authorization, the medication is not covered.

Authorizations are normally issued by nurse reviewers or

other authorized personnel at the insurance company who

review the doctor's orders and other documentation to

ensure that the medication is medically necessary. A set

standard or protocol is used to determine whether the

medication will be approved or not.

Step Therapy is defined as the practice of beginning drug

therapy for a medical condition with the most

cost-effective and safest drug therapy and progressing to

other more costly or risky therapy, only if necessary. The

aims are to control costs and minimize risks. Step Therapy

is also called step protocol. Step Therapy may require the

beneficiary to use a " first-line " drug before authorization

is granted for a more costly " second-line " drug. For

example, an individual may be required to try generic

ibuprofen as a “first line” drug for arthritis pain before

they will be given brand name Celebrex as a “second line”

drug.

Due to the complicated formularies within many Medicare

Part D plans, it is important that participants in Medicare

Part D let their physician know which plan they have signed

up for. This way the individual’s physician can work

within the constraints of the formulary in order to ensure

that the beneficiary gets the best and most appropriate

therapy that is covered under their plan.

Medicare Part D individuals should also be aware that

purchasing medications, which are not covered under their

plan’s formulary, from a licensed Canadian pharmacy, is an

excellent alternative to paying the local U.S. pharmacy

price. Many individuals will also benefit greatly by

ordering their medications from a Canadian pharmacy once

they have reached the gap in coverage, called the “doughnut

hole”. This gap in coverage occurs at the $2250 annual

drug expenditure level and beneficiaries are 100%

responsible for their drug costs until they reach $5100 in

drug expenditures. For a surprisingly high number of

individuals, they may save more by ordering all of their

medications from Canada rather than purchasing them through

the Medicare program.

Medicare Part D beneficiaries must understand how their

plan’s formulary works and they also need to keep up to

date with any notices of changes to their plan’s formulary.

Without keeping up to date they may find themselves in a

position in which they are unable to get their medication

the next time they walk into their pharmacy. With the

preceding information a Medicare beneficiary will be better

equipped to choose a plan that is best for them. Medicare

Part D coverage combined with Canadian pharmacy savings can

provide seniors with incredible savings. These individuals

should be able to save a lot of money.

About the Author:

Cockerill is a licensed pharmacist and the

co-founder and pharmacy manager of UniversalDrugstore.com.

Mr. Cockerill graduated from the Faculty of Pharmacy at the

University of Manitoba with Honors in 1998. Mr. Cockerill

is the recipient of the 2005 Manager of the Year award from

the Manitoba Customer Contact Association.

http://www.universaldrugstore.com