Definition: List of preferred prescription drugs in which different drugs have different co-pays, according to the policies of Drug Plans or Prescription Drug Benefits.
Each drug is assigned to a specific 'tier' within the formulary.
The most cost-effective drugs, often generic drugs, belong to the most preferred tier and typically have the lowest co-pay, whereas the least cost effective drugs belong to the least preferred tier and have the highest co-pay.
Tiered formularies encourage consumers to be cost-conscious in choosing their medications, and reward consumers for choosing generic medications by requiring lower co-pay.
Tiered formularies may also provide some level of coverage for prescriptions that might not otherwise be covered.