Prior Authorization

Formulary Management · 6 min read

Prior authorization (PA) is a utilization management tool that requires a prescriber to obtain approval from the PBM or health plan before a medication will be covered. It is designed to ensure clinical appropriateness and cost-effective prescribing, but it also creates administrative burden and can delay patient access to necessary medications.

How Prior Authorization Works

When a prescription requires PA, the pharmacy receives a rejection at the point of sale indicating that authorization is needed. The prescriber must then submit clinical documentation to the PBM, typically demonstrating that the patient meets specific criteria for the medication. The PBM reviews the submission against its clinical policy and approves or denies the request, usually within 24-72 hours for standard requests and within 24 hours for urgent requests.

Clinical Criteria

PA criteria vary by drug and PBM but commonly include diagnosis confirmation, documentation of failed trials of lower-cost alternatives (step therapy), lab values or clinical measurements demonstrating disease severity, prescriber specialty requirements, and quantity or duration limits. Well-designed PA criteria align with clinical guidelines and ensure that high-cost drugs are used for clinically appropriate patients.

The Administrative Burden Problem

Prior authorization is one of the most frequently cited sources of physician frustration with the healthcare system. The American Medical Association estimates that physicians complete an average of 45 prior authorization requests per week, spending approximately 14 hours of staff time on PA-related activities. Electronic prior authorization (ePA) systems have reduced processing time but have not eliminated the underlying burden.

Employer Considerations

Employers should evaluate PA programs based on their clinical validity, approval rates, denial appeal outcomes, and impact on member satisfaction. A PA program with a 95% approval rate raises questions about whether the administrative process is adding value or simply creating friction. Conversely, programs with very low approval rates may indicate overly restrictive criteria that prevent access to necessary medications.