Medicare Part D prescription policies typically feature stratified copayment levels. This strategy involves imposing lower co-payments for more affordable medications, while pricier medications are subjected to higher co-payments, allowing both plans and members to curb expenses. Beneficiaries are incentivized to opt for more cost-effective medications such as generics or established versions of drugs.
Tier 1 invariably offers the most economical co-payment and is usually reserved for generic medications. Tier 2 generally encompasses “preferred” brand-name medications. Tier 3 typically includes “non-preferred” branded drugs. Tier 4 mostly covers “specialty” medications, which denote particularly costly drugs and those necessary for uncommon conditions.
What do the terms preferred and non-preferred signify? Each Part D plan engages in negotiations over prices with manufacturers for every covered medication. A “preferred” label is assigned to a drug when a plan secures an advantageous discount; conversely, without a favorable price, the drug receives a “non-preferred” categorization. Logically, the plan encourages usage of medications for which it has negotiated lower costs—therefore assigning them to a tier with reduced co-payments.
While some policies exhibit up to five or six tiers, others maintain a singular tier where a set percentage of the price (usually around 25 percent) is applied to the cost of all medications.
