Drugs are organized into tiers—Tier 1 costs the least, and Tier 5 costs the most. Your plan may also require prior authorization (doctor approval) or step therapy (trying a cheaper drug first) before covering certain medications. Knowing your formulary before you enroll can save you hundreds—or thousands—of dollars per year.
In this article
- What is a Medicare Part D formulary?
- The five drug tiers explained
- Coverage rules: prior authorization, step therapy, quantity limits
- How to check if your drug is covered
- What happens if your drug is removed mid-year?
- How to request a formulary exception
- How to compare formularies when shopping for a plan
- Frequently asked questions
Most people choose their Medicare Part D plan based on the monthly premium. That’s a mistake that can cost you far more than you save.
The plan with the lowest premium may place your most important medications on a high, expensive tier — or not cover them at all. Understanding how formularies work is the single most important skill for choosing a Part D plan that actually saves you money.
What Is a Medicare Part D Formulary?
A formulary is your Part D plan’s official drug list—the specific prescription medications the plan has agreed to cover and their cost. Every Medicare Part D plan has its own formulary, and formularies differ significantly from plan to plan.
CMS requires that all Part D formularies include drugs in each “therapeutic category” (broad medical purpose), but plans have significant discretion in choosing which specific drugs to include and at which tier. This is why the same drug can have wildly different copays — or be covered by one plan and not another — depending on which plan you’re enrolled in.
Formularies are updated at least annually (plans submit changes to CMS each fall for the coming year), and plans can make changes mid-year with limitations. We’ll cover what to do if your drug is dropped mid-year later in this article.
The Five Drug Tiers Explained
Most Medicare Part D plans use a 5-tier structure, though some plans use three or four tiers. The tier your drug falls on determines your copay or coinsurance amount.
Preferred generics
$0–$5 copay
Metformin, lisinopril, atorvastatin
Non-preferred generics
$10–$20 copay
Generic drugs not on preferred list
Preferred brands
$40–$100 copay
Eliquis, Ozempic, Entresto
Non-preferred brands
$80–$150+ copay
Brand drugs not on preferred list
Specialty drugs
25–33% coinsurance
Cancer drugs, biologics, MS treatments
The specific copays shown above are typical—your plan’s actual amounts depend on the plan you choose. Always check your plan’s Evidence of Coverage (EOC) document or the drug pricing tool on Medicare.gov before enrolling.
A note on Tier 5 specialty drugs
Specialty drugs — biologics, chemotherapy agents, and other high-cost medications — are almost always on Tier 5. Plans can charge up to 33% coinsurance on specialty drugs, meaning if a drug has a $10,000 monthly cost, your share could be $2,500–$3,300. This is exactly why the 2026 $2,000 out-of-pocket cap is so important for patients on specialty medications.
Coverage Rules: Prior Authorization, Step Therapy, and Quantity Limits
Being on the formulary doesn’t always mean automatic coverage. Plans apply three main coverage rules that can restrict when and how a drug is covered.
Prior Authorization (PA)
Prior authorization means your doctor must get approval from the plan before prescribing a specific drug. Plans use PA to verify that the drug is medically necessary, is being prescribed for an approved condition, and that cheaper alternatives have been considered.
PA is common for brand-name drugs, specialty medications, and drugs with high abuse potential. The process typically takes 1–3 business days (or 72 hours for expedited reviews). If your doctor submits the correct documentation, approval rates are generally high.
Step Therapy
Step therapy (also called “fail first”) requires you to try one or more lower-cost drugs before your plan will cover the drug your doctor originally prescribed. The logic: if a generic or lower-tier drug treats your condition equally well, the plan prefers you use that first.
Example: Your doctor prescribes Eliquis (apixaban, a brand-name blood thinner). Your plan may require you to first try warfarin (generic, Tier 1) for 30–60 days. If warfarin causes complications or doesn’t control your INR, your doctor can then document the failure and request coverage for Eliquis.
Step therapy restrictions cannot be applied when a beneficiary is already stable on a medication at the time they join a plan. If you were taking Eliquis before enrolling in Medicare, the plan cannot force you to switch to warfarin to start.
Quantity Limits (QL)
Quantity limits restrict how much of a drug your plan will cover per fill or per month—for example, no more than 60 tablets per 30-day supply or one injection pen per 28 days. These limits are based on FDA-approved dosing guidelines. If your doctor prescribes above the quantity limit, you’ll need a quantity limit exception.
How to Check If Your Drug Is Covered
There are three reliable ways to check your drug’s formulary status:
What Happens If Your Drug Is Removed Mid-Year?
Plans can remove drugs from their formulary or move them to a higher tier during the year, but only under limited circumstances and with required notice to members.
If your drug is removed mid-year, Medicare rules require your plan to
- Notify you at least 60 days before the change takes effect
- Continue covering your drug at the old cost-sharing for at least 30 days while you transition
- Give you a Special Enrollment Period to switch plans in some circumstances
If you’re mid-treatment with a covered specialty drug, the plan generally must provide a temporary supply to allow you to finish a treatment course or transition to a different drug safely.
How to Request a Formulary Exception
If your drug isn’t on the formulary — or is on a tier that makes it unaffordable — you can request a formulary exception. This is a formal process where your doctor argues that a specific drug is medically necessary for your condition.
| Request Type | What It’s For | Timeframe |
|---|---|---|
| Coverage determination | Standard request for coverage of a non-covered or restricted drug | 72 hours (standard), 24 hours (expedited) |
| Formulary exception | Request to cover a non-formulary drug or waive step therapy | 72 hours (standard), 24 hours (expedited) |
| Tier exception | Request to cover a drug at a lower tier copay | 72 hours (standard), 24 hours (expedited) |
| Appeal (Level 1) | Appeal a denied coverage determination | 7 days (standard), 72 hours (expedited) |
Your doctor must provide a “statement of medical necessity” supporting the exception. Exceptions are more likely to be approved when your doctor documents why lower-tier alternatives are inappropriate for your specific medical situation.
How to Compare Formularies When Shopping for a Plan
During Medicare’s Annual Enrollment Period (Oct 15 – Dec 7), you can review and switch Part D plans. Here’s how to compare formularies effectively:
- List every drug you take — name, dosage, and how many you take per month. Include drugs you take occasionally.
- Use Medicare.gov’s Plan Finder — enter your drug list and your zip code. The tool calculates your estimated annual cost for each plan, including premiums plus drug cost-sharing.
- Sort by estimated annual drug cost, not premium. A plan with a $0 premium but your drug on Tier 5 with 33% coinsurance can cost far more than a $40/month premium plan that puts your drug on Tier 3.
- Check pharmacy network—using your plan’s preferred pharmacy (often a mail-order or specific retail chain) often reduces your copay further.
- Look for quantity limits and PA requirements — the Plan Finder shows these restrictions for each drug on each plan.
Get help comparing Part D formularies
A licensed Medicare specialist can run a full drug cost analysis across all plans available in your zip code — at no cost to you.
Frequently Asked Questions
What is a Medicare Part D formulary?
A formulary is the list of prescription drugs your Part D plan covers. Drugs are organized into tiers—lower tiers cost less, and higher tiers cost more. Each plan’s formulary is different, which is why your costs for the same drug can vary dramatically from plan to plan.
What are the Medicare drug plan tiers?
Most plans use 5 tiers: Tier 1 (preferred generics, $0–$5), Tier 2 (non-preferred generics, $10–$20), Tier 3 (preferred brands, $40–$100), Tier 4 (non-preferred brands, $80–$150+), and Tier 5 (specialty drugs, 25–33% coinsurance).
What is prior authorization in Medicare Part D?
Prior authorization is a requirement that your doctor receive plan approval before the plan will cover a specific drug. Without prior authorization for a PA-required drug, you pay full retail price at the pharmacy.
What is step therapy in Medicare drug plans?
Step therapy requires you to try a lower-cost drug first before the plan will cover a more expensive alternative. If the first-step drug doesn’t work or causes side effects, your doctor can document the failure and request coverage for the drug they originally prescribed.
Can I appeal if my Part D plan won’t cover my drug?
Yes. You can request a coverage determination, formulary exception, or tier exception. If those are denied, you can appeal. Your doctor must provide documentation supporting why the specific drug is medically necessary. Expedited reviews are available within 24–72 hours for urgent cases.
Can I switch Part D plans if my drug is dropped from the formulary?
Yes, under certain circumstances. If your plan drops your drug or moves it to a higher tier, you may qualify for a Special Enrollment Period to switch plans mid-year. Contact Medicare at 1-800-MEDICARE or visit medicare.gov to determine your eligibility.
