When discussing prescription drug coverage, you should start by checking whether your specific medications are listed on the plan’s formulary, how much you’ll pay for each one, and whether any restrictions could delay or limit your access. These three factors drive the real cost of a plan far more than the monthly premium alone. Whether you’re comparing plans during open enrollment, helping a family member choose Medicare Part D, or reviewing your current coverage, here’s what to focus on.
Check the Formulary for Your Exact Medications
Every insurance plan maintains a drug list called a formulary. If your medication isn’t on it, the plan won’t cover it at all, or you’ll need to go through an appeals process to request an exception. Before choosing or switching plans, look up each of your prescriptions on the plan’s website and confirm the exact drug name, dosage, and form (tablet vs. capsule vs. injection) is covered. A plan might cover a medication at one strength but not another.
If a drug you take isn’t listed, you have a few options. You can ask your prescriber whether a covered alternative would work equally well. You can also file an exception request, which is a formal ask for the plan to cover a drug that’s not on its formulary. For Medicare plans, this is a built-in right. But it takes time, and approval isn’t guaranteed, so it’s better to choose a plan that already covers what you need.
Understand How Drug Tiers Affect Your Costs
Most plans organize their formularies into tiers, each with a different cost-sharing level. The lower the tier, the less you pay out of pocket. A typical structure looks like this:
- Tier 1 (lowest cost): Most generic drugs
- Tier 2 (medium cost): Preferred brand-name drugs
- Tier 3 (higher cost): Non-preferred brand-name drugs
- Specialty tier (highest cost): Very high-cost drugs, often for complex conditions
Two plans might both cover your medication but place it on different tiers. One plan could list your brand-name drug as Tier 2 with a $40 copay while another puts it at Tier 3 with a $80 copay. Multiply that difference across 12 months and the “cheaper” premium plan can easily become the more expensive one overall. When comparing plans, look up the tier placement for every drug you take and calculate your estimated annual cost, not just the monthly premium.
If your medication sits on a high tier, ask your doctor whether a lower-tier alternative exists. Generics on Tier 1 can cost as little as a few dollars per fill, while specialty-tier drugs may require coinsurance of 25% to 33% of the drug’s full price.
Know the Restrictions That Can Block Access
Even when a drug appears on a plan’s formulary, the plan may impose utilization management rules that control how and when you can get it. Three restrictions are common:
- Prior authorization: Your prescriber must get preapproval from the insurer before the pharmacy will fill the prescription. This can delay access by days or longer. For some medications, prior authorization rates run extremely high. In Medicaid managed care plans, certain brand-name drugs require prior authorization more than 90% of the time.
- Step therapy: The plan requires you to try a cheaper drug first and show it didn’t work before it will cover the one your doctor originally prescribed. This is less common overall but can be a significant barrier when it applies to your specific medication.
- Quantity limits: The plan caps how many pills or doses you can get per fill or per month. This is the most frequently used restriction. More than a third of covered drug formulations in both marketplace and Medicaid plans have quantity limits, including inexpensive generics that cost under $16 for a two-month supply.
These restrictions are listed on the formulary, usually as abbreviations like “PA,” “ST,” or “QL” next to the drug name. Check for them before you enroll. A plan that covers your drug but requires prior authorization and step therapy could leave you without medication for weeks while paperwork is processed.
Compare Pharmacy Networks
Where you fill your prescriptions changes what you pay. Most plans designate certain pharmacies as “preferred,” meaning they’ve negotiated lower cost-sharing at those locations. Using a non-preferred pharmacy for the same medication on the same plan costs more, sometimes significantly more.
Research on Medicare Part D found that beneficiaries without low-income subsidies faced an average difference of $129 per year in out-of-pocket spending between non-preferred and preferred pharmacies. At the 75th percentile, the gap widened to $185 per year. Even for a single 30-day fill of a generic drug, the per-prescription difference ranged from $3 to $8 depending on the plan.
Before selecting a plan, confirm that a pharmacy convenient to you is in the preferred network. If you use mail-order pharmacy services, check whether the plan offers them and at what cost tier. Mail order often provides 90-day supplies at a lower per-dose cost than retail fills.
Factor in the Out-of-Pocket Cap
If you’re on Medicare Part D, a major change took effect in 2025: annual out-of-pocket spending on covered prescriptions is now capped at $2,000. Once you hit that threshold, you pay nothing more for covered drugs for the rest of the year. This eliminates the old “donut hole” coverage gap that previously left beneficiaries paying full price for a stretch of their annual drug spending.
This cap matters most if you take expensive medications. Someone on a specialty-tier drug that costs thousands per month could hit the $2,000 ceiling within the first few fills, then pay zero for the remaining months. When comparing plans, estimate how quickly you’d reach the cap based on your drug costs. A plan with slightly higher copays but the same $2,000 ceiling might cost you the same total as one with lower copays if you’re going to hit the cap regardless.
Watch for Late Enrollment Penalties
For Medicare beneficiaries, delaying enrollment in Part D carries a permanent financial penalty. If you go 63 or more consecutive days without creditable drug coverage (coverage at least as good as standard Part D), you’ll owe an extra 1% of the national base beneficiary premium for every month you were uncovered. That adds up to 12% per year of delay, and you pay this surcharge for as long as you have Part D.
The national base beneficiary premium is $38.99 in 2026. So if you delayed enrollment by two years (24 months), your penalty would be 24% of $38.99, roughly $9.36 added to your monthly premium permanently. Even if you rarely use prescriptions now, the penalty makes it expensive to go without coverage and enroll later when you need it.
Employer coverage, TRICARE, and certain other plans count as creditable coverage and protect you from the penalty. If you’re not sure whether your current coverage qualifies, your plan is required to notify you each year, typically before Medicare’s open enrollment period.
Check Whether You Qualify for Financial Help
Medicare’s Extra Help program (also called the Low Income Subsidy) covers most or all of Part D costs for people with limited income and savings. For 2026, individuals earning up to $23,940 with resources below $18,090 may qualify. For married couples, the thresholds are $32,460 in income and $36,100 in resources. Resources include savings and investments but generally exclude your home and car.
Beneficiaries who receive Extra Help are largely insulated from the cost differences between preferred and non-preferred pharmacies. Their average annual spending gap between pharmacy types is only about $8, compared to $129 for those without subsidies. If you think you might be close to the income limits, it’s worth applying. Even partial Extra Help can substantially reduce premiums, deductibles, and copays.
Your Pre-Enrollment Checklist
Before committing to any plan, work through these steps for each medication you take:
- Formulary check: Confirm the drug name, dose, and form are all listed as covered.
- Tier placement: Note which tier the drug falls on and what your copay or coinsurance will be.
- Restrictions: Look for prior authorization, step therapy, or quantity limit flags next to the drug.
- Pharmacy network: Verify that a preferred pharmacy is accessible to you.
- Annual cost estimate: Add up monthly copays for all your drugs, plus the plan premium and deductible, to get a true yearly cost.
- Generic alternatives: If any drug is on a high tier, ask your prescriber whether a lower-cost option exists.
- Out-of-pocket cap: For Medicare Part D, calculate whether you’ll reach the $2,000 cap and how that changes your total spending.
Running through this list takes 20 to 30 minutes per plan but can save hundreds or even thousands of dollars over the year. The cheapest premium is almost never the cheapest plan once you account for what you’ll actually pay at the pharmacy counter.