Formulary Vs. Non-Formulary

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Insurance companies use a drug formulary to determine which medications they will cover.
Insurance companies use a drug formulary to determine which medications they will cover. (Image: medication image by Tom Oliveira from Fotolia.com)

Health insurance providers use a formulary to classify prescription medications for which they provide coverage. The formulary often is structured in tiers or classes of medications. The insurer can change the list at its discretion.

Drug Formulary

Because multiple medications typically are available to treat the same medical condition, the insurance company will approve the safest, most effective and least expensive medications for coverage under its health plans. An insurance provider provides a list of medications, approved by a team of physicians and pharmacists, that will be covered under the insurance benefits for its insured parties.

Benefits

The formulary medication lists are regularly reviewed by a peer review panel of physicians and pharmacists appointed by the insurance company, and medications are added or deleted as deemed appropriate by this peer review process. Patients can reduce their costs by consulting the formulary, because covered medications require less out-of-pocket cost to the insured.

Non-Formulary Medications

Medications classified as non-formulary are typically brand-name medications that have no available generic equivalent. They are usually in the third tier of prescription benefits and require the highest out-of-pocket expense. In some cases the medications may require prior approval by your insurance company. Typically the health care provider obtains this approval.

Differences

The major difference between formulary and non-formulary medications is the out-of-pocket expense. Each health insurance provider compiles and monitors the formulary for its insured individuals. Formulary lists can contain both brand-name and generic medications; non-formulary medications usually are only brand-name drugs.

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