How to File a Formulary Exception: Non-Formulary Drug Coverage Explained

Every insurance plan and Medicare Part D plan maintains a formulary — a list of covered drugs organized into cost-sharing tiers. When your prescribed medication is not on your plan's formulary, or is on a tier with cost-sharing so high it is effectively inaccessible, you have the right to request a formulary exception. This process is separate from a standard Prior Authorization Denied: How to Appeal" class="auto-link">prior authorization appeal, though the two are often confused.

What Is a Formulary Exception?

A formulary exception is a formal request asking your insurance plan to cover a drug that is either:

• Not on the formulary at all (non-formulary drug exception)
• On the formulary but at a tier higher than clinically appropriate (tier exception)
• Restricted by step therapy requirements that you want to bypass (step therapy exception)

Formulary exceptions are a federally mandated right for all ACA-compliant plans and Medicare Part D plans. The insurer is required to have an exception process and must disclose how to file one.

The Three Types of Formulary Exceptions

Non-formulary drug exception. The drug is simply not listed on your plan's covered drug list. To get it covered, you need to prove that:

• All covered alternatives on the formulary are contraindicated for you, or
• All covered alternatives were tried and were clinically ineffective, or
• The covered alternatives would cause or worsen a health condition for you

Tier exception. The drug is on the formulary but on a very high cost-sharing tier (typically specialty or non-preferred specialty). You can request placement on a lower tier by demonstrating that:

• Drugs on the lower tier are not clinically appropriate for you, or
• You meet financial hardship criteria (for some plans)

Note: Under ACA regulations, plans are not required to grant tier exceptions for drugs in the specialty tier — but Medicare Part D plans are required to have a tiering exception process.

Step therapy exception. Your plan requires you to try one or more specified drugs before covering your prescribed medication. A step therapy exception asks the insurer to skip the required step(s) because:

• You already tried the required drug and it failed
• The required drug is medically contraindicated for you
• The required drug would cause adverse effects given your other medications or conditions
• Trying the required drug would delay necessary treatment and cause harm

The Medical Necessity Exception Standard

The most important concept in any formulary exception is medical necessity. The exception will be granted when your physician documents that the non-covered drug is medically necessary for you — meaning:

• It is appropriate for your specific diagnosis
• It is consistent with generally accepted standards of medical practice
• The covered alternatives are not appropriate for you specifically (not just generally less preferred)

The "for you specifically" standard is critical. Generic arguments that a drug is effective aren't enough — you need to explain why the formulary alternatives are inadequate for your individual case.

How to File a Formulary Exception

Step 1: Get the denial or formulary information in writing. Your EOB)" class="auto-link">Explanation of Benefits, denial notice, or plan's formulary document should identify the covered alternatives and the exception process contact information.

Step 2: Have your prescriber complete the exception form. Formulary exception forms request:

• Patient name, member ID, date of birth
• Drug name, dose, and frequency being requested
• Diagnosis and ICD-10 code
• Medical necessity statement explaining why the requested drug is necessary and why alternatives are inadequate
• Documentation of any prior trial of alternatives (dates, doses, outcomes)

Step 3: Attach supporting documentation. Include relevant lab results, imaging, specialist notes, or published clinical guidelines that support using the requested drug for your condition.

Step 4: Confirm the timeline. Standard formulary exception decisions must be made within 72 hours of receiving all necessary information. Expedited decisions (when delay would harm health) must be made within 24 hours.

Step 5: Appeal if denied. If the formulary exception is denied, you have the right to appeal. For Medicare Part D, this proceeds through a defined sequence: coverage determination → redetermination by the plan → Independent Review Entity (IRE) review → ALJ hearing → Medicare Appeals Council → Federal court. For commercial plans: internal appeal → external independent review.

Medicare Part D Formulary Exceptions

Medicare Part D plans have a specific formulary exception process governed by CMS regulations. Key points:

• You, your prescriber, or your authorized representative can file
• The plan must provide a written decision with the specific reason for denial
• If denied, a written notice of your right to appeal must be provided
• The IRE (currently Maximus Federal Services) conducts independent review of Part D denials

Low-income subsidy (LIS) beneficiaries may have additional protections, including the right to a 30-day emergency supply at the low-income copay level while the exception is being processed.

State Protections for Step Therapy Exceptions

As of 2025, more than 30 states have enacted step therapy override or exception laws. These laws typically provide that a step therapy exception must be granted when:

• The required drug was previously tried and resulted in adverse effects or inadequate response
• The required drug is contraindicated
• The prescribing physician determines that the required drug would be clinically inappropriate for the patient
• The patient's condition is life-threatening and immediate access is needed

If you are in a state with step therapy exception protections, reference the applicable state law code in your appeal letter.

Fight Back With ClaimBack

Navigating formulary exceptions is one of the most procedure-heavy areas of insurance appeals, with tight timelines and specific documentation requirements. ClaimBack helps you build your medical necessity case and submit it through the right channel — the first time.

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Related Reading

• How to Write an Insurance Appeal Letter
• What Is Medical Necessity?
• Internal vs. External Insurance Appeal: What's the Difference?