When you look at your insurance card or explanation of benefits, you may see references to "drug tiers" — Tier 1, Tier 2, Tier 3, or sometimes up to Tier 6. These tiers determine how much you pay for your prescriptions. There are also tariff tiers under the 2026 Section 232 proclamation. Understanding both is essential for managing your prescription costs in 2026.
Insurance Formulary Tiers
A formulary is the list of prescription drugs covered by your insurance plan. Formularies organize drugs into tiers based on cost and preference. Each tier has a different copay or coinsurance level.
### Typical Tier Structure (Commercial Insurance)
Tier 1 — Preferred Generics
- Lowest copay: typically $0–$15
- Includes: FDA-approved generic drugs that the insurer has designated as preferred
- Examples: metformin, lisinopril, sertraline, atorvastatin (most common generics)
Tier 2 — Non-Preferred Generics
- Copay: typically $10–$30
- Includes: generic drugs not on the preferred list, often because of price or utilization management
Tier 3 — Preferred Brand Name
- Copay: typically $30–$60
- Includes: brand name drugs the insurer considers cost-effective, often those with no generic alternative and moderate cost
Tier 4 — Non-Preferred Brand Name
- Copay: typically $60–$100+
- Includes: brand name drugs the insurer wants to discourage in favor of generics or preferred alternatives
Tier 5 — Specialty Drugs
- Coinsurance: typically 20–33% of the drug's cost
- Includes: high-cost biologics, injectables, and specialty medications. A 20% coinsurance on a $7,000/month biologic = $1,400/month out of pocket.
Some plans add a Tier 6 for the most expensive specialty drugs with even higher cost-sharing.
### Medicare Part D Tiers
Medicare Part D plans use a similar 5-tier structure:
- Tier 1 — Preferred generic drugs
- Tier 2 — Generic drugs
- Tier 3 — Preferred brand drugs
- Tier 4 — Non-preferred drugs (brand and generic)
- Tier 5 — Specialty drugs (coinsurance, often 25–33%)
The Inflation Reduction Act's $2,000 out-of-pocket cap (2025–) provides protection at the upper end — but patients on high-tier specialty drugs can still reach that cap early in the year.
### How the 2026 Tariff Affects Formulary Tiers
If the tariff drives up the cost of brand name drugs from non-MFN companies, insurers have two options:
1. Absorb the cost — Keep the tier placement the same, pay more themselves, raise premiums at renewal
2. Tier-shift the drug — Move it from Tier 3 to Tier 4 or Tier 5, effectively passing the cost increase to the patient through higher copays
Tier-shifting is the more likely outcome for drugs significantly affected by the tariff. Watch for formulary notices from your insurer, which they are required to send before plan year changes.
The 2026 Tariff Tiers: A Different Kind of Tier
Separate from insurance tiers, the Section 232 pharmaceutical proclamation establishes 6 tariff tiers for pharmaceutical imports:
- 100% — Default for brand-name patented drugs with no deal or exemption
- 20% — Manufacturers with approved US onshoring plans
- 15% — Drugs manufactured in EU, Japan, South Korea, Switzerland, or Liechtenstein
- 10% — Drugs manufactured in the United Kingdom
- 0% (MFN deal) — 13 Annex III companies with Most Favored Nation pricing agreements
- 0% (exempt) — All generics, biosimilars, orphan drugs, and other specialty categories
These tariff tiers and your insurance formulary tiers are separate systems — but they interact. A drug moving from the 0% tariff tier to a potential 100% tier affects manufacturer costs, which eventually affects formulary tier placement.
How to Find Your Drug's Tier
Insurance formulary tier:
- Log into your insurer's member portal
- Use the formulary search tool and search by drug name
- Your plan documents (Summary of Benefits and Coverage) also list the tier structure and associated copays
Tariff tier:
- Use the RxTariff drug search tool — shows tariff tier based on live FDA and CMS data
- Check the MFN deal tracker for 0% deal company list
If your drug is in a high insurance formulary tier AND in a high tariff tier (100% default), you face compounding cost pressure. The most effective response: check whether a generic or biosimilar equivalent exists — which would move the drug to formulary Tier 1 and tariff tier 0% simultaneously.