How do prescription drug coverage plans typically function?

Prescription drug coverage plans primarily function by covering prescribed medications through formularies. A formulary is a list of medications that the plan agrees to cover, which usually includes both generic and brand-name drugs. This system allows insurers to manage costs while ensuring that patients have access to necessary medications. By organizing drugs into different tiers, plans can incentivize the use of lower-cost options and manage overall healthcare spending.

Formularies are typically categorized based on factors such as drug efficacy, safety, and cost-effectiveness. Patients may find that medications not on the formulary may have limited or no coverage, which helps the plan manage expenses while still providing necessary medications to those in need.

This structure is sensible because it balances the need for comprehensive access to medications with the financial realities of providing coverage, ultimately aiming to make prescription drug prices more manageable for insurers and, indirectly, patients.