Medication costs are rising every year. Health insurance programs are looking for ways to cut their costs. Some of the strategies that have been used are to exclude expensive drugs, limit the number of refills and increase patient co-pays.

One tool that health insurance programs use is the formulary. The formulary is a list of preferred drugs. Most of the drugs on the list are generics and brand names with no generics available. The purpose of the preferred list is to persuade patients to choose lower costs medications.

If a patient chooses to have a prescription filled that is not on the preferred list then they may have to pay higher co-pay, pay the difference in price, or meet a deductible. The strictest plans simply don't cover drugs not on the list although most insurers will review the patient's request for a particular medication on a case-by-case basis.

A formulary is decided by a committee in the insurance company, physicians and pharmacists consider effective treatment and cost to the insurance company. Insurance companies decide on the list using several criteria. The first benchmark is that it must be safe, usually defined as approved by the FDA (Federal Drug Administration). Second, it must treat an ailment effectively with as few side effects as possible. The third criterion is that when compared to other drugs on the list it is shown to offer distinctive features. The last factor is cost. This is one of the most important as health insurance companies try to control their medication costs. So if two name brands work equally well on the same condition they are likely to choose the less expensive one.

Another way that health insurance programs are lowering medication costs is to employ a multi-level co-pay plan. In a three level plan, the first level is generic co-pay, the lowest co-pay. The next level is a higher co-pay for a brand name drugs with no generic available. Level three drugs have the highest co-pays. These are drugs that are brands with a generic available.

Not every retail pharmacy is an approved pharmacy with your insurance company. You should find out which pharmacies accept your health plan. The pharmacies on the list will be the ones with which the insurance company has negotiated the best prices.

Insurance companies contract with mail-order pharmacies to fill prescriptions for their policyholders for better rates based on volume. For the patient, the main advantage is that they can get a 90-day supply at once instead of the 30 day supply normally available at a retail pharmacy.

Understanding how your health plan handles prescription drugs will help you to make the most out of your insurance.