Prior Authorization

How It Works

Prior authorization (PA) is the most common utilization-management tool insurers use for brand-name and specialty drugs. A prescriber submits clinical documentation (diagnosis code, trial-and-failure history, lab results) and the PBM or plan reviews against its medical policy before approving coverage. Medicare Part D plans must respond to standard PA requests within 72 hours and expedited (patient urgent) requests within 24 hours; commercial plans have varying timelines with many states now mandating 48-hour responses for urgent requests. The American Medical Association's 2023 prior authorization physician survey found 94% of physicians report PA delays patient access to necessary care, with an average of 45 PAs per physician per week. CMS's 2024 final rule on prior authorization, effective 2026-2027, requires Medicare Advantage, Medicaid, and ACA-plan insurers to provide specific PA decision reasons, report metrics publicly, and support electronic PA (ePA) through FHIR APIs. Several states (Texas, Louisiana, Colorado, Michigan) have enacted "gold card" laws exempting physicians with high historical PA approval rates from PA requirements for certain drugs. Medicare Part D uses a specific PA category for drugs in the Formulary Reference File; patients denied coverage can request a formulary exception with 72-hour turnaround. PA is distinct from step therapy (which requires trying cheaper alternatives first) and from quantity limits (which cap the units per fill).

Related Terms

• Formulary, A list of prescription drugs covered by an insurance plan, organized into tiers that determine how much the patient pays for each drug.
• Step Therapy (Fail First), An insurance requirement that a patient must try and fail on one or more lower-cost drugs before the plan will cover a more expensive medication.
• Specialty Drug, A high-cost medication, typically above $1,000 per month, that treats complex or chronic conditions and often requires special handling, storage, or administration.