Question

A health plan uses a four-tier formulary:

$10 generic; $35 brand; $65 brand non-preferred; $120 speciality

Cost of pharmaceutical products:

Drug A (generic)= $50/month

Drug B (brand)=$135/month

Drug C (brand non-preferred)= $230/month

Drug D (speciality)= $2000/month

If a person is a health plan member on all four medications, how much out-of-pocket must he pay? And how much does the health plan for the medications? Explain why.

Answer 1

Tier 1 or Tier I: Tier I drugs are generally automatically approved by your insurance and cost you the lowest co-pays that your plan offers.

Tier 2 or Tier II: Tier II drugs may require a pre-authorization from your insurance company.

Tier 3: or Tier III: Tier III drugs usually require a pre-authorization, with your doctor explaining to your health insurer why you need to take this particular drug instead of a cheaper option. These drugs will cost you a higher co-pay than the lower tiers.

Tier 4 or Tier IV, also called specialty drugs: These are usually newly approved pharmaceutical drugs that your payer wants to discourage because of their expense. Tier IV is a newer designation, first used in 2009. These drugs almost always require a pre-authorization, and evidence from your doctor that you don't have any less expensive option. Your insurer may assign you a specific dollar co-pay, or they may require you to pay a percentage of the cost, ranging from 10 to 60 percent. For example, a very expensive chemotherapeutic drug, priced at $1,400 per month may cost you $600 per month. Each insurer has their own policy regarding your rate when it comes to tier 4.