Rare Disease Day: Understanding Insurance Formulary Changes
The rare disease community is no stranger to changes and transitions within the insurance industry. This Rare Disease Day, we share answers to your questions regarding these overwhelming and often times abrupt changes to help empower you in communications with your insurer and navigating your coverage.
What is an Insurance Formulary?
An insurance formulary is a list of prescription medications covered by a health insurance plan. It categorizes drugs into different tiers, with each tier representing different cost-sharing levels for the insured individual. Typically, generic drugs are on lower tiers with lower copays, while brand-name and specialty drugs are on higher tiers with higher costs.
Why Do Formularies Change?
Insurance companies and pharmacy benefit managers (PBMs) routinely update formularies for various reasons, including:
- Cost Management — Insurers negotiate drug prices and may exclude expensive medications in favor of cheaper alternatives.
- New Drug Approvals — As new medications become available, formularies adjust to include them or replace older treatments.
- Safety and Effectiveness — Some drugs may be removed if new research or regulatory changes indicate safety concerns or better alternatives.
- Patent Expirations — When brand-name drug patents expire, generic versions may replace them on the formulary at a lower cost.
Types of Formulary Changes:
- Tier Adjustments — A drug may be moved to a higher tier, increasing out-of-pocket costs.
- Coverage Removal — Some medications may be dropped from coverage entirely.
- Prior Authorization Requirements — Insurers may require doctors to obtain approval before prescribing certain medications.
- Step Therapy — Patients must try lower-cost alternatives before insurers cover a more expensive drug.
Impact on Patients
Formulary changes can lead to higher medication costs, the need to switch medications, or additional administrative steps to obtain coverage. Patients should review annual changes to their insurance plan’s formulary to ensure their prescriptions remain covered at an affordable rate.
How to Manage Formulary Changes:
- Check Annual Updates — Insurance companies typically release updated formularies before the new plan year.
- Consult Your Doctor — If your medication is affected, your doctor may recommend an alternative or help with an appeal.
- Request an Exception — You can request a formulary exception if a drug is medically necessary and no suitable alternative exists. This process is started with a Medical Exception Form.
- Explore Assistance Programs — Pharmaceutical companies and nonprofit organizations may offer financial assistance for medications removed from coverage.
