Formulary Tiers: How Your Insurance Decides What Drugs Cost

When you pick up a prescription, the price you pay isn’t just about the drug—it’s about formulary tiers, a system pharmacies and insurers use to group medications by cost and clinical value. Also known as drug tiers, this structure determines whether you pay $5, $50, or $200 for the same pill, depending on your plan’s rules.

Formulary tiers aren’t random. They’re built by insurance companies and pharmacy benefit managers (PBMs) based on cost, effectiveness, and how often a drug is prescribed. Most plans have four to six tiers. Tier 1 usually includes generic drugs with the lowest copay. Tier 2 has preferred brand-name drugs. Tier 3 is non-preferred brands—more expensive. Tier 4 and 5? Those are specialty drugs: injectables, oral cancer meds, or biologics that can cost hundreds or thousands. If your drug is on Tier 4, your plan might require prior authorization or step therapy—meaning you have to try cheaper options first.

Here’s the thing: just because a drug is generic doesn’t mean it’s always on Tier 1. Some generics are grouped higher if they’re less commonly used or if the insurer has a deal with a brand-name maker. And if your doctor prescribes a drug not on your plan’s formulary at all? You might pay full price—unless you file an exception. Many people don’t know they can appeal a tier placement. If your medication is in a high tier and you can’t afford it, your doctor can submit documentation showing why cheaper alternatives won’t work for you. Some plans also offer copay assistance programs tied to specific tiers.

What you’ll find in the posts below are real-world examples of how formulary tiers affect people every day. From how copay assistance for generics can cut your bill, to why clozapine costs so much and how smoking changes its coverage, to how oral chemotherapy and antidepressants are often stuck in the highest tiers—these articles show the system in action. You’ll also see how post-marketing pharmacovigilance and drug interactions influence which drugs get placed where on the formulary. This isn’t theory. It’s what happens when insurance rules meet real medicine.