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The list of prescription drugs an insurance plan covers, usually organized into tiers (Tier 1 generic = cheapest, higher tiers = brand-name + specialty = most expensive). A drug not on the formulary may not be covered at all.
Each Medicare Part D plan, each Medicare Advantage prescription bundle (MA-PD), and each commercial insurance plan publishes its own formulary. The formulary changes annually (sometimes mid-year) — a drug covered last year may not be covered this year, and the tier (which determines copay) can shift. Plans must give 60-day advance notice for many changes; others happen with shorter notice.
Tiers, typically: • Tier 1 — preferred generic ($0-$10 copay) • Tier 2 — generic ($10-$25 copay) • Tier 3 — preferred brand ($30-$60 copay) • Tier 4 — non-preferred brand ($60-$100+ copay) • Tier 5 — specialty (typically 25-33% coinsurance; the highest-cost biologics, cancer drugs, MS therapies)
A drug not on the formulary requires a "formulary exception" — a type of prior authorization where the prescriber documents medical necessity. About 75% of formulary exceptions are approved on first request, more on appeal. If denied, alternatives exist: switch to a covered alternative drug, pay cash out-of-pocket (often eligible for manufacturer copay assistance), apply for the manufacturer's patient-assistance program (for low-income patients on brand-name drugs).
Family strategy: when starting a new long-term medication, check formulary status at the doctor's office BEFORE leaving. The doctor can sometimes switch to a covered alternative in the same drug class with one prescription edit, avoiding the "go to pharmacy, learn it's not covered, go back to doctor, switch prescription, return to pharmacy" cycle. Apps like GoodRx, Cost Plus Drugs (Mark Cuban's pharmacy), and the manufacturer's own coupon programs can sometimes beat the insurance copay for cash-pay generics.
Whenever a doctor prescribes a new medication. The pharmacy will know whether it's covered; check before leaving the doctor's office to avoid the second-trip-to-the-pharmacy pattern.
Terms families frequently confuse with formulary.
Formulary is the list of covered drugs; PA is the approval step that gates certain coverages. A drug on the formulary at Tier 3 may still require PA before dispensing. A drug NOT on the formulary requires a formulary exception (which is a type of PA).
Part D is the prescription drug benefit; the formulary is one specific Part D plan's drug list. Every Part D plan has its own formulary; the question "is this drug covered by Medicare?" is really "is this drug on MY Part D plan's formulary?"
See also: all glossary terms · conditions by name · step-by-step playbooks