Learn How Prescription Drug Coverage Works with Health Insurance:

1) Formulary: There are Formulary and Non-Formulary Medications. Formulary Medications are Covered by Insurance. Non-Formulary Medications are Not.

2) Formulary Tiers: Typically Formularies Have Tiers 1-4 for Generics, Preferred Brand, Non-Preferred Brand and Specialty Medications.

3) Pharmacy Benefit Managers (PBMs): Negotiate the Formulary Tiers for Health Insurance Coverage in Exchange for 'Discounts' from Pharmaceutical Manufacturers. Also, PBMs Process the Pharmacy Claims for a Health Insurance Plan.

4) How PBMs Make Money:
A) Rebates - Commissions Paid by Pharmaceutical Manufacturers to PBMs, Which the PBMs in Turn Pay Out--in part--to Their Employer Customers.

B) Spread Pricing - The Markup PBMs Place on Generic Medications, Which is Then Paid by Their Employer Client.

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