Find out more about your tiered plan with dynamic therapeutic formulary: Simon’s story
Simon went to the drug store to pick up his ulcer medicine today. He only had to pay for
part of it thanks to his employer’s tiered drug insurance plan with dynamic therapeutic
formulary.
This plan helps Simon keep his prescription drug costs down with two cost-saving measures:
two reimbursement tiers, and generic substitution.
Simon’s prescription drug plan has two tiers.
Tier 1 is the dynamic therapeutic formulary list of drugs. It’s a list of the most clinically-effective
and cost-effective drugs that will give Simon the best value for his money. It includes
about 85% of all prescription drugs on the market. It’s called “dynamic” because
it is updated on a regular basis. Drugs are added or removed based on the most recent
medical information. When drugs are going to be removed from the list, a letter will
be sent to Simon to let him know well in advance, so he’ll have plenty of time to talk to
his doctor about an alternative. The drugs on this list are more economical,
and Simon’s reimbursement percentage will be higher if he and his doctor choose drugs
from this list. Tier 2 is a list of drugs that are not included
on the Tier 1 list. Tier 2 drugs are not as cost-effective as Tier 1 drugs.
This list gives Simon more drugs to choose from, even though they’re more expensive
and his reimbursement percentage will be lower. This two-level approach gives Simon and his
family more control over their choice of prescription drugs. If they want to reduce the amount they
pay for their prescription drugs, they should ask their doctor to help them choose drugs
from the Tier 1 list.
The second cost-saving measure is generic substitution. Both tiers include brand name
drugs and their generic equivalents. When Simon chooses a generic drug instead of the
brand name drug, he will pay less and get the most value for his money.
If he chooses the brand name drug, he’ll have to pay the difference between the brand
name drug and the less expensive generic equivalent.
Let’s look at an example to see how much money Simon will save if he chooses the generic
equivalent of a brand name drug that’s on the Tier 1 list.
Simon’s drug plan covers most of the drugs used to treat ulcers.
Here are four ulcer-treatment drugs – both generic and brand name drugs from both Tier
1 and Tier 2. All four drugs are equally effective for treating ulcers.
Even though they’re all covered by his drug plan, Simon will pay less for the Tier 1 generic
equivalent than he would for any of the other drugs. Tier 2 gives Simon more drugs to choose
from than he would have if his plan only had one list.
Right off the bat, there’s a 20% difference in cost between Tier 1 and Tier 2 drugs because
of the different reimbursement percentages. Simon’s drug plan pays a higher percentage
for Tier 1 drugs.
In both tiers, no matter which drug Simon chooses, his reimbursement will be based on
the cost of the generic drug.
For example, under Tier 1, the brand name drug costs $60 and the generic equivalent
costs $20.
Simon’s drug plan will pay 80% of the cost of the $20 generic equivalent, which means
his drug plan will pay $16.
Reimbursements are always calculated based on the cost of the generic drug – even if
plan members choose the brand name drug.
That means Simon will pay $44 if he chooses the brand name drug, but only $4 if he chooses
the generic equivalent. And remember – both drugs are equally effective!
So you really just have to remember two things: First: Tier 1 gives you a higher reimbursement
percentage. And second: it pays to choose the generic equivalent drug
Do what Simon did, talk to your doctor to make sure you’re getting the drugs that
give you and your family the very best value for your money!