Pharmacy Benefits Glossary
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Pharmacy terms can be confusing—but they don’t have to be.
This glossary breaks down common words and phrases you might hear when using your pharmacy benefits. Whether you're picking up a prescription or reviewing your coverage, these quick definitions will help you in making informed choices and advocating for yourself and your family.
- Biologics: Medicines made from living cells. Because biologics are made this way, each batch might be a little different, but the medication still works the same.
- Biosimilars: Nearly identical versions of biologics — approved by the FDA to be just as safe and effective.
- Brand-name drug: A drug developed and sold by a specific company under a trademark-protected name.
- Copay/Coinsurance: Your share of the cost for a prescription.
- Copay: A set dollar amount you pay for a prescription drug at the pharmacy (e.g., $10 for a generic, $30 for a brand).
- Coinsurance: Instead of a flat fee, you pay a percentage of the drug cost (e.g., 20% of the price).
- Deductible: The amount you pay before your plan starts to share costs.
- Drug Tiers: Levels in the formulary that determine how much you’ll pay.
- Tier 1: lowest cost (usually generics)
- Tier 2: medium cost (preferred brands)
- Tier 3: higher cost (non-preferred brands or specialty drugs)
- Exclusions: Drugs or categories not covered by your plan.
- Formulary: A list of medications your plan covers usually divided into tiers (generic, preferred brand, non-preferred, specialty).
- Generic drug: A low-cost, FDA-approved version of a brand-name drug. It contains the same active ingredients and is just as safe and effective.
- Interchangeable Biosimilar: A special type of biosimilar that goes through more tests for FDA approval, and in some states, pharmacists can substitute them without needing a new prescription.
- Mail-Order Pharmacy: A service that delivers prescriptions (often for 90-day supplies) directly to your home, sometimes at lower cost.
- Network or Preferred Pharmacy: A pharmacy that offers lower costs under your plan.
- Out-of-Pocket Maximum: The maximum you’ll pay in a plan year for covered healthcare (including prescriptions). After this, your plan pays 100%.
- Prior Authorization (PA): Approval needed from the insurance plan before a drug will be covered. Usually applies to expensive or specialty medications.
- Quantity limits (QL): Restrictions on the amount of a medication your plan will cover over a certain period for safety and cost reasons.
- Specialty drugs: High-cost prescription drugs used to treat complex or chronic conditions. These types of drugs often require prior authorization and often must be filled through a specialty pharmacy.
- Step Therapy: A requirement to first try lower-cost medications before moving to more expensive ones.
