Your health insurance plan includes a list called a formulary — a directory of the drugs it covers. If you’ve ever been stunned at how much it cost you to fill a prescription, it’s possible that medication wasn’t on your formulary.

The formulary is also called a preferred drug list (PDL). At first glance, you may think you need a decoder ring to figure it out. But understanding your PDL can help you pay the lowest price for the drugs you need.

Your plan’s list is created by a committee made up of doctors and pharmacists. The group works together to make sure the formulary is based on safety, effectiveness, and overall value, says Louise Norris, a licensed insurance broker and analyst for healthinsurance.org.

A PDL categorizes drugs into tiers, usually three to five of them, based on how much they cost you. Drugs on Tier 1 are the cheapest and are often generic versions of brand-name drugs that are in higher, more expensive, tiers, Norris says.   

Your insurance plan may not cover every possible medication. It depends on whether your PDL is open or closed.

With an open formulary, your health plan covers any drug approved by the FDA. “Any drug imaginable is on some tier. Worst-case scenario is the most expensive drugs are on the highest tiers,” says Michael Botta, PhD, co-founder of the direct-to-patient health care company Sesame. 

Many commercial plans are open or very close to it, he says.

With a closed formulary, “there are some medications that are on none of the tiers and so are not subject to your medication benefits,” Botta says.

A third of Americans use Medicaid, state-funded health insurance for those with low incomes, he says. Most of those plans have closed formularies.

Go to your insurance plan’s website and search for it. It might be under a tab like “find drugs” or “covered medications.” The formulary may list drugs:

• Alphabetically
• By tier
• By type of drug
• By medical condition they treat

If you can’t find a drug you’re looking for, call the number on your insurance card for information, Botta says.

“You might find that your health plan has an interactive formulary page that shows you covered alternatives if your medication isn’t on the formulary,” Norris says. It also may give you lower-tier alternatives if your medication is in a higher tier, she adds.

The PDL usually includes other important information about your coverage, including:

• Prior Authorization (PA), or whether your plan requires you to get pre-approval to get a medication covered
• Step Therapy (ST), which means you need to try cheaper drugs first to see if they work for your condition 
• Quantity Limits (QL), when a drug is covered only for a certain number of refills or for a specific number of doses per day

Most formularies change at the start of each calendar year. Before you order your first refill of the year, check it to make sure your drugs are still on the list, if they’ve been replaced with generics, or if new ones you need are added.  

If you’re thinking of changing your health insurance plan, check to see if all your family’s medications are on the formulary before making a decision. 

Norris says it’s common to have low, fixed-rate copays for Tier 1 drugs, but coinsurance (in which you pay a percentage of the cost) for top-tier drugs. To lower your costs, ask your doctor for a medication in a lower tier, if one is available.

You may wonder whether generics are as good as brand name medication. FDA-approved generics have the same ingredients and are as effective as their brand name counterparts. They’re cheaper because they don’t have to repeat expensive effectiveness and safety studies. There’s also more market competition because many different generics may be available.

Make sure you share the most up-to-date formulary list with your doctor, especially if cost is a concern. Let them know that you want the lowest-cost option that will meet your needs, Botta suggests.

In some cases, you and your doctor may need to get creative. For example, an extended-release drug might not be covered while the standard release version of the same drug is. Your doctor could write a prescription for the covered medication that you then take at different times during the day. This can mimic the effect of a time-release medication.

If you need a drug that isn’t on your health plan’s list, your doctor can submit a formulary exception request for you. You might need to do this for several reasons, Norris says.

• You’re allergic to the alternatives that are on the formulary.
• You’ve already tried alternatives on the PDL and they didn’t work.
• The drugs that are on the formulary could interact poorly with other medications you take.
• The formulary drugs may cause problems due to other health conditions you have.

It usually takes a while for insurance plans to add newly approved drugs to their formularies. If your doctor thinks a brand-new drug is the best or only choice for your medical needs, they can file a formulary exception if your health plan hasn’t yet started covering the new drug.

There is no guarantee your insurance provider will grant a formulary exception. If not, there’s an appeal process. It starts with an internal appeal. If that doesn’t work, it can go to an external appeal — one reviewed by a third party instead of your health plan.

This is sometimes an uphill battle, Botta says. He advises going to the website of the drug’s manufacturer to look for discounts. Your pharmacist can suggest ways to save, too.