A Tier 4 drug is a medicine your insurance plan places in one of its most expensive cost groups, and that tier, more than the drug itself, sets what you pay at the pharmacy. These are usually brand-name or specialty drugs for long-term or complex conditions, often with no cheaper generic to switch to.1MetLife. Drug Tier List: Understanding Prescription Drug Coverage The price on the label is shaped as much by how insurance pays for drugs as by what the medicine costs to make.
Where Tier 4 Sits on Your Plan’s Drug List
Your plan keeps a drug list, called a formulary, that groups covered medicines into tiers.2Humana. Understanding drug tiers Each tier carries its own cost-sharing level, so the tier decides your bill.3MetLife. Drug Tier List: Understanding Prescription Drug Coverage Most plans use about 5 tiers, from Tier 1 generics up to the highest-cost drugs.4Humana. Understanding drug tiers Plans don’t all number the same way, though. In some, Tier 4 is the top brand-name tier, and in others a specialty tier sits above it at Tier 5.5Humana. Understanding drug tiers6SmithRx. The Differences Between Tier 1-5 Prescription Drugs
Tier 4 drugs are often specialty brand-name products with no generic version, and they commonly treat complex, rare, or chronic conditions.7MetLife. Drug Tier List: Understanding Prescription Drug Coverage In Medicare drug plans, a drug had to cost $670 or more a month to be put on the specialty tier starting in 2017.8Medicare Payment Advisory Commission. Restructuring Medicare Part D for the era of specialty drugs So on a Medicare plan, a specialty-tier label signals a drug that costs the plan hundreds or thousands of dollars a month.
To find your drug’s tier, search your plan’s formulary online or in the member app by drug name. Then check the plan’s tier chart, since “Tier 4” can mean different things across plans. Notes like PA or ST beside the drug flag extra rules. If the drug isn’t listed at all, call the number on your card.
A Tier 4 label doesn’t mean the drug is worse or experimental. Tier reflects cost and the deals a plan has made, not quality. Because each plan negotiates its own deals with drugmakers, one medicine can be Tier 3 on your plan and Tier 4 on a neighbor’s. A plan can also move a drug when the new plan year starts, which can raise your cost even though your prescription hasn’t changed. If you’re comparing plans, look up your specific drug on each one rather than assuming the label means the same thing.
Why Your Share of the Bill Is So High
Lower tiers usually charge a copay, a flat fee per fill. Top tiers often charge coinsurance instead, a percentage of the drug’s cost, commonly 30% to 50% depending on the plan.9SmithRx. The Differences Between Tier 1-5 Prescription Drugs Thirty percent of a $5,000 monthly drug is $1,500 for a single fill.10Drug Channels. Tier 4 Co-Pays and Pharmacy Prices
A flat fee stays the same whether the drug costs $50 or $5,000, while a percentage rises and falls with the price. Some Tier 4 drugs still carry a flat fee, so the plan’s benefit summary is where to check which kind yours uses.
Your percentage is frequently figured from the drug’s list price, not the lower price your plan actually pays after discounts.11JAMA Health Forum. Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy As discounts behind the scenes grow, the share you pay grows too.12JAMA Health Forum. Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy
The bill also moves across the year. Early on, you may pay the full price until your deductible is met. Some plans apply the deductible to Tier 4 drugs, while others exempt certain tiers, so the benefit summary tells you whether yours applies to specialty drugs. After the deductible, coinsurance applies to each fill. Once you reach your plan’s out-of-pocket maximum, your cost can drop to zero for the rest of the year, but January can bring the biggest bill again when the deductible resets.
Medicare Part D now caps yearly out-of-pocket drug spending, which limits the damage from Tier 4 drugs. The cap is set by law and changes, so check this year’s number. Many people on expensive drugs reach it within the first few months.
Cost affects whether people stay on treatment. When out-of-pocket costs rise above $100, up to 75% of people leave some specialty prescriptions unfilled at the pharmacy.13PubMed Central. The association between cost sharing, prior authorization, and specialty drug utilization: A systematic review In people with multiple sclerosis, coinsurance was linked to stopping doses more than flat copays were, regardless of the amount.14The American Journal of Managed Care. Impact of Cost Sharing on Specialty Drug Utilization and Outcomes: A Review of the Evidence and Future Directions If a bill makes you consider skipping a fill, talk to your doctor or pharmacist first, since help options exist.
Why These Drugs Cost So Much to Begin With
Many Tier 4 drugs are biologics, made from living cells rather than mixed from chemicals.15Biologic Meds. The Real Cost of Biologic Drugs Making them is complex, and small manufacturing problems matter far more than with ordinary pills.16PubMed Central. The Economics of Biosimilars A small change in temperature or nutrients can alter the final drug, so manufacturers run many quality checks. A batch that fails testing can be thrown away at great expense, and a plant built to meet these standards is costly to construct and maintain.
Development costs are large too. Bringing a new drug to market cost about $879 million on average once failed attempts and financing were counted.17ASPE. Costs of Drug Development and Research and Development Intensity in the US, 2000-2018 That varied widely, from about $379 million to over $1.7 billion depending on the type of drug.18ASPE. Costs of Drug Development and Research and Development Intensity in the US, 2000-2018 Most drug candidates fail during testing, so the cost of a successful drug includes money spent on ones that never reached the market.
Even so, development cost doesn’t fully explain the price. It’s a one-time cost spread across years of sales. Prices are set by what the market will bear while competition is blocked, and they often keep rising after launch, long after the research is paid off.
Competition is delayed by patents. Drugmakers often file many overlapping patents on one drug, covering its makeup, how it’s made, and its uses.19Commonwealth Fund. How Drugmakers Use the Patent Process to Keep Prices High These patent walls, plus court fights and settlements, often delay cheaper competitors for years.20Commonwealth Fund. How Drugmakers Use the Patent Process to Keep Prices High21Journal of Generic Medicines: The Business Journal for the Generic Medicines Sector. The dual barriers to biosimilar competition: A comparative analysis of US patent thickets and EU supplementary protection certificates
The U.S. also pays more than other countries. Brand-name drug prices are higher here than in France, where officials weigh a drug’s value before setting its price.22PubMed Central. Why France Spends Less Than the United States on Drugs: A Comparative Study of Drug Pricing and Pricing Regulation Medicare would have saved $5.1 billion in 2018 paying French prices for just six drugs.23PubMed Central. Why France Spends Less Than the United States on Drugs: A Comparative Study of Drug Pricing and Pricing Regulation
The Hidden Deals That Shape Tier and Price
Pharmacy benefit managers run drug benefits for insurers and employers. They build the drug list, negotiate with drugmakers, contract with pharmacies, and process claims, so the price you see at the counter reflects their calculations. Your card often names this company for prescriptions, and it usually decides tier questions and exceptions, though your doctor typically submits the request.
These companies pressure drugmakers for rebates by threatening to drop drugs or add hurdles.24PubMed. Pharmacy Benefit Management: The Cost of Drug Price Rebates A drugmaker that pays bigger rebates can win a better tier.25JAMA Health Forum. Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy A rebate is a payment back from the drugmaker after the sale, so the plan’s net cost is lower than the list price. Your coinsurance is often calculated before that rebate, so you don’t directly share in the discount.
Employers and insurers hire these companies to hold down costs, but their income can depend partly on rebates. If the middleman keeps part of the rebate, it may prefer a high-list-price drug with a big rebate over a cheaper one.26JAMA Health Forum. Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy Some drugmakers even sell the same drug at two list prices, a low one with no rebate and a high one with rebates.27JAMA Health Forum. Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy
A cheaper twin may still not help you if the lower-priced version isn’t on your plan’s list. Ask your pharmacist whether an unbranded or lower-list-price version is covered. If it is, coinsurance on it will be lower.
Prior Authorization and Other Hurdles
Specialty drugs often require prior authorization, meaning your plan must approve the drug before it pays.28Patient Advocate Foundation. Understanding Drug Tiers – Patient Advocate Foundation Plans may also require step therapy, proof that a cheaper drug was tried first.29PubMed Central. Access to Addiction Pharmacotherapy in Private Health Plans In one look at addiction medicines, an injectable form needed approval 85% of the time, while a generic pill almost never did.30PubMed Central. Access to Addiction Pharmacotherapy in Private Health Plans
In practice, your doctor’s office sends medical records to the plan. Decisions can take days, so ask the office to submit as soon as it prescribes. If the plan denies the request, your doctor can appeal or request a formulary exception. Approvals often expire and must be renewed, often yearly.
Step therapy means the plan wants proof you tried a cheaper drug and it didn’t work or caused problems. Your doctor’s records of past treatments usually satisfy this. If you already tried the cheaper drug under a previous plan, ask your doctor to document that history.
You can also ask for a lower tier. Plans may allow a tiering exception if lower-tier options don’t work for you. Your doctor writes a letter explaining why, and approval can switch you to a lower cost level.
Ways to Lower What You Pay
Drugmakers often offer copay cards that cover much of your share. Federal rules generally bar people on government programs such as Medicare from using these cards, so those patients look to other help. Most cards have a yearly limit, which can run out before the year ends.
Some plans use copay accumulators, programs that don’t count that aid toward your deductible or out-of-pocket maximum.31PubMed Central. A primer on copay accumulators, copay maximizers, and alternative funding programs The aid can then run out midyear and leave you facing the full share. In states that banned these programs, patients’ costs dropped 41% to 63%, saving $128 to $520 a month.32PubMed Central. Patient liability, treatment adherence, and treatment persistence associated with state bans of copay accumulator adjustment programs People in those states were also 14% more likely to keep taking their medicine as directed.33PubMed Central. Patient liability, treatment adherence, and treatment persistence associated with state bans of copay accumulator adjustment programs
This week, you can search the drugmaker’s site for a copay or patient assistance program, and ask your plan whether manufacturer aid counts toward your deductible. Check whether your state bans these programs, and ask about nonprofit foundations that help with specific diseases. Foundations often have income limits, and drugmakers run their own assistance programs, some of which provide the drug free to people who qualify. Foundation funds can run out, so applying early in the year matters.
With your doctor, ask whether a lower-tier drug treats your condition as well, and whether a biosimilar, a close competing version of a biologic, or a generic is available. Also ask whether getting the drug at a clinic or doctor’s office rather than a hospital changes the cost.
At open enrollment, look up your drug’s tier on each plan you’re considering. Compare coinsurance and out-of-pocket maximums, not just premiums. Medicare users can use the plan finder tool to compare yearly costs.
Where You Get the Drug Can Change the Price
For patients with private insurance, hospitals typically charged about three times what they paid for drugs given in the clinic.34PubMed. Hospital Prices for Physician-Administered Drugs for Patients with Private Insurance Markups at some hospitals were over 6 times those at independent doctors’ offices.35PubMed. Hospital Prices for Physician-Administered Drugs for Patients with Private Insurance The hospital adds a markup over what it paid, and a percentage of that larger price becomes your share. If your coinsurance is a percentage, getting the same drug at an independent office can lower your share.
Before your next infusion, ask the plan for the cost at different sites, and ask your doctor whether an outside infusion center is an option. A home infusion, independent office, or specialty pharmacy option may also be covered, so ask your plan. Request an itemized bill to see the drug charge.
Changing sites isn’t always simple. Your doctor may only work with one location, and some patients need a hospital for safety reasons. Moving works best when your doctor agrees it’s medically reasonable.
Will Cheaper Versions Arrive
A biosimilar is a close competing version of a biologic, made after protections run out. A generic is an exact chemical copy of a pill, while a biosimilar is highly similar but not identical because living cells can’t be copied perfectly. That’s part of why biosimilars cost more to develop than generics, which limits how much cheaper they can be. Each of the first few competitors lowers average prices by about 5% to 7%.36PubMed. Biosimilar competition: Early learning
Savings depend on doctors and patients actually switching, which happens faster where governments encourage it.37PubMed Central. Key drivers for market penetration of biosimilars in Europe Your plan must also decide to cover the biosimilar and place it on a favorable tier before you benefit, and prescribers need to be comfortable writing for it, which can take years.
For you, a plan may move the original drug to a higher tier once a biosimilar is covered. A switch is usually something to discuss with your doctor first, and it’s worth asking at renewal time whether a biosimilar for your drug has been added.