Quick answer: a Part D formulary is a plan’s list of covered drugs, and each drug sits on a tier that sets your copay or coinsurance. Lower tiers, usually generics, cost less than higher tiers such as non-preferred brands and specialty drugs. Plans must cover at least two drugs in the most commonly prescribed categories and most drugs in six protected classes, and they can add rules such as prior authorization or step therapy. In 2026, your out-of-pocket spending on covered Part D drugs is capped at $2,100 for the year.
Two people can join two different Medicare drug plans and pay very different amounts for the same prescription. The reason is almost always the formulary: whether the drug is covered, which tier it sits on, which pharmacies get the lowest price, and what rules the plan attaches to it. Understanding those pieces makes plan comparisons much easier, especially during the Annual Enrollment Period from October 15 to December 7.
This guide explains how Part D formularies are built, how tiers work, the coverage rules plans use, what to do when a drug is not covered, how the 2026 cost stages fit together, and how to check a plan before you join. It is part of our Medicare guide, which covers enrollment, costs and plan choices. For a quick overview of where drug coverage sits in Medicare, see Medicare Parts A, B, C and D explained.
Facts below come from Medicare.gov’s pages on how drug plans work and Part D costs, and from CMS, checked October 2026. This is general information, not medical or insurance advice.
What a Formulary Is
A formulary is the list of prescription drugs a Medicare drug plan covers. It can include brand-name drugs, generics, original biological products and biosimilars. Both stand-alone Part D plans and Medicare Advantage plans with drug coverage use formularies.
What every plan must cover
Medicare sets minimum standards. According to Medicare.gov, each formulary must include at least two drugs in the most commonly prescribed categories and classes, but plans choose which specific drugs to offer. Plans must also include most drugs in six protected classes:
- Cancer drugs
- HIV/AIDS drugs
- Antidepressants
- Antipsychotics
- Anticonvulsants
- Immunosuppressants for organ transplants
Plans must also cover commercially available vaccines, such as shingles and RSV vaccines, when medically necessary, and you pay nothing out of pocket for adult vaccines recommended by the Advisory Committee on Immunization Practices.
What Part D does not handle
Some drugs are covered elsewhere in Medicare. Part B covers certain drugs, usually ones given in a doctor’s office or hospital outpatient setting, and Part A generally covers drugs given during a covered inpatient hospital or skilled nursing facility stay. Part D covers outpatient drugs that Part B does not.
Formularies can change
Medicare.gov explains that plans can change their drug lists during the year under Medicare guidelines, for example when new drugs or new medical information become available. Your plan must notify you of changes that affect drugs you take. Each fall, the Annual Notice of Change lists formulary changes for the next year.
How Drug Tiers Work
To manage costs, many plans place drugs into tiers. Each plan sets its own tier structure, but the general rule is the same: a drug on a lower tier costs you less than one on a higher tier.
Medicare.gov gives this example of a tier structure, noting that your plan’s tiers may differ:
| Tier | Typical drugs | Typical cost to you |
|---|---|---|
| Tier 1 | Most generic prescription drugs | Lowest copayment |
| Tier 2 | Preferred brand-name drugs | Medium copayment |
| Tier 3 | Non-preferred brand-name drugs | Higher copayment |
| Specialty tier | Very high-cost drugs | Highest cost sharing |
Many real plans use five or six tiers, often splitting generics into preferred and standard tiers. Two plans can place the same drug on different tiers, so a medication that is cheap in one plan can be expensive in another.
Copays versus coinsurance
Lower tiers often use a flat copayment, such as a set dollar amount per fill. Higher tiers often use coinsurance, a percentage of the drug’s cost, which means what you pay rises when the drug’s price rises. Our explainer on deductibles, copays and coinsurance covers the difference in more detail.
Why your cost can change mid-year
Medicare.gov notes that coinsurance for a drug may increase when the manufacturer raises its price. Your cost can also go up if you keep taking a brand-name drug after your plan adds a generic or biosimilar version and moves the brand to a higher tier.
Coverage Rules Plans Attach to Drugs
Being on the formulary does not always mean a drug is covered automatically. Plans commonly use three tools, which Medicare.gov describes on its drug plan rules page.
Prior authorization. You or your prescriber must contact the plan and show that the drug is medically necessary before the plan covers it.
Step therapy. The plan asks you to try one or more lower-cost drugs that treat the same condition before it covers a more expensive one. If the first drug does not work, the plan may then cover the original prescription.
Quantity limits. The plan limits how much of a drug it covers over a period of time, such as a number of pills per month, often for safety or cost reasons.
These rules are listed in each plan’s formulary, usually with abbreviations such as PA, ST and QL next to the drug name. Check them before you enroll, because a drug that requires step therapy in one plan may have no restriction in another.
Pharmacy networks
Drug plans also have pharmacy networks, and many have preferred pharmacies where your cost is lower. Using an out-of-network pharmacy usually means paying more or getting no coverage, except in limited situations. Mail-order options can reduce costs for drugs you take regularly. For questions about refill timing, see our guide on how early insurance will refill a prescription.
When a Drug Is Not Covered: Exceptions and Appeals
Sometimes a formulary does not include a drug you need, or places it on an expensive tier. Medicare provides ways to ask for help.
Formulary exceptions
A formulary exception asks the plan to cover a drug that is not on its list, or to waive a coverage rule such as step therapy or a quantity limit. Medicare.gov says you or your prescriber must request the exception, and your prescriber must provide a supporting statement explaining the medical reason.
Tiering exceptions
A tiering exception asks the plan to charge a lower amount for a drug on a non-preferred tier, usually because similar drugs on lower tiers will not work for you. Here too the prescriber supplies a supporting statement.
How fast plans must decide
Under Medicare’s coverage determination rules, a plan generally has 72 hours to decide a standard exception request after it receives the prescriber’s supporting statement, and 24 hours for an expedited request when waiting could seriously harm your health. Asking your prescriber to send the statement promptly, and keeping a note of when it was sent, helps keep the process moving.
Transition supplies for new members
People who are new to a plan, or whose drug is affected by a formulary change, may be able to get a temporary transition supply of a drug that is not on the formulary or that has new restrictions. This gives time to switch to a covered drug or request an exception. Ask the plan about its transition policy right after enrolling.
If the plan says no
If an exception request is denied, you can appeal. The plan’s denial notice explains how and by when. Appeals go through several levels, starting with a redetermination by the plan and moving to an independent review entity if needed. Your plan’s Evidence of Coverage describes each step and its deadlines.
How Part D Costs Work in 2026
Tiers decide your share of each prescription, but the year as a whole moves through stages. For 2026, Medicare.gov describes three:
- Deductible stage. If your plan has a deductible, you pay the full cost of covered drugs until you meet it. No plan may have a deductible above $615 in 2026, and some plans have none.
- Initial coverage stage. After the deductible, you pay 25% coinsurance for covered generic and brand-name drugs, or your plan’s copay or coinsurance amounts, until your out-of-pocket spending reaches $2,100.
- Catastrophic coverage. Once you reach $2,100 in out-of-pocket costs, you pay nothing for covered Part D drugs for the rest of the year.
Medicare.gov lists the 2027 limits as a maximum deductible of $700 and an out-of-pocket threshold of $2,400, which is the figure to use when comparing plans for next year.
Other cost protections
- Insulin. You pay no more than $35 for a one-month supply of each Part D-covered insulin.
- Medicare Prescription Payment Plan. This option lets you spread out-of-pocket drug costs into monthly payments over the calendar year instead of paying at the pharmacy. Details are on Medicare.gov’s Medicare Prescription Payment Plan page.
- Negotiated prices. Medicare.gov says prices for the first 10 Part D drugs negotiated by Medicare took effect on January 1, 2026, with 15 more taking effect January 1, 2027. Ask your plan how negotiated prices affect your costs.
- Extra Help. People with limited income and resources may qualify for Extra Help, which lowers premiums, deductibles and copays.
Premiums are separate from these stages. Each plan sets its own premium, and people with higher incomes pay an extra income-related amount set by Social Security.
How to Check a Plan's Formulary Before You Enroll
The surest way to avoid surprises is to check every drug you take against every plan you are considering. These steps work for first-time enrollees and annual reviews alike.
- Make a complete list. Write down every prescription with its exact name, strength, dose and how often you take it. Include drugs you take only occasionally.
- Use the Medicare Plan Finder. Enter your drugs and preferred pharmacies on Medicare.gov. The tool shows which plans cover your drugs, their tiers and restrictions, and an estimated yearly cost.
- Look beyond the premium. Compare the total estimated yearly cost, which combines premiums, the deductible and your share of drug costs.
- Check restrictions. Note any prior authorization, step therapy or quantity limits on your drugs.
- Check pharmacies. Confirm your pharmacy is in network, and whether it is preferred.
- Read the plan’s own formulary. Plans post their drug lists online. Confirm the Plan Finder details against the plan’s document.
- Repeat each fall. Formularies, tiers and prices change every year, so review your plan during the Annual Enrollment Period.
People choosing between a stand-alone drug plan with Original Medicare and a Medicare Advantage plan that includes drug coverage should run this check for both routes. Our comparison of Medicare Advantage and Medigap covers the broader trade-offs, and our guide on when to sign up for Medicare explains when first-time enrollees can join a drug plan. Free help is also available from your State Health Insurance Assistance Program (SHIP) and from 1-800-MEDICARE.
FAQ
Frequently Asked Questions
What is a Medicare Part D formulary?
It is a drug plan’s list of covered prescription drugs. Each plan has its own formulary, which must meet Medicare’s minimum standards, including at least two drugs in the most commonly prescribed categories and classes.
What do drug tiers mean?
Tiers group drugs by cost. Lower tiers, usually generics, cost you less, while higher tiers such as non-preferred brands and specialty drugs cost more. Each plan sets its own tiers.
What can I do if my drug is not on my plan's formulary?
You or your prescriber can request a formulary exception, with a supporting statement from the prescriber. If the plan denies it, you can appeal. New members may also qualify for a temporary transition supply.
Is there a cap on Part D drug costs?
Yes. In 2026, once your out-of-pocket spending on covered Part D drugs reaches $2,100, you pay nothing more for covered drugs that year. Medicare.gov lists the 2027 threshold as $2,400.
Can my plan change its formulary during the year?
Yes, under Medicare guidelines. Plans must notify you of changes that affect drugs you take, and the Annual Notice of Change lists changes for the coming year. N: This article is general information only and is not medical or insurance advice. Pro Insurance Info does not sell Medicare plans. Confirm coverage and costs with your plan, Medicare.gov, 1-800-MEDICARE or your State Health Insurance Assistance Program.
