A key benefit of health insurance is access to prescription drugs. A health plan’s prescription drug formulary manages that access. At its core, a formulary is a list of prescription drugs covered by a plan. The list contains all the brand and generic drugs that a consumer would have access to as a plan enrollee. In practice, a formulary is a complex, multilayered tool that manages the safe and appropriate use of prescription drugs as well as the interests of a variety of stakeholders. For insurers, the formulary is a way to compete with other health plans and limit overall drug spending; for prescribers, the formulary can influence prescribing decisions; and for consumers, the formulary determines whether and how they access and what they pay out of pocket for prescription drugs needed to maintain health. Despite the central role of formularies in drug access, many older adults have a limited understanding of their health plan’s drug formulary and how its design can affect their ability to get their prescription drugs. This Fact Sheet highlights the essential components of drug formularies and considers the challenges that older adults, particularly those with low medication literacy, face when responding to the impacts and implications of formularies annually and throughout the plan year.
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