Importance of Prior Authorization for Prescription Drugs

by | Published on Jun 27, 2022 | Medical Billing

Prior Authorization for Prescription Medications
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Prior authorization — also referred to as preauthorization, preapproval and precertification — is a strategy that health insurance companies use to ensure that patients receive treatments and medications that are medically necessary, appropriate, safe, and affordable. The American Medical Association defines prior authorization as,” the process by which physicians and other healthcare providers must obtain advance approval from a health insurance plan before a specific procedure, service, device, supply or medication is delivered to the patient in order to qualify for coverage.” When it comes to prescription drugs, the goal of prior authorization is to ensure that patients get access to effective, safe and affordable prescription drugs. Companies offering medical billing services work closely with physicians to ensure a smoother process for getting prior authorization requests approved. If a patient is prescribed a drug that requires prior approval for medical necessity and such approval is not obtained, they may be required to pay the full cost.

Types of Medications that may require Prior Authorization

Prior authorizations are usually required for more costly medications for which a less costly alternative is available. Prescription medications that may need a prior authorization request include:

  • Used to treat only specific health conditions or people of certain age groups
  • Are costly (such as those used to treat psoriasis and rheumatoid arthritis)
  • May pose health risks when combined with other medications
  • Higher risk for misuse or abuse
  • May have less expensive alternatives such as a brand name medication available as a less expensive generic
  • Are often used for cosmetic reasons
  • Are used at higher doses than normal (opioids)
  • Deemed medically necessary by the physician but not covered by the patient’s plan
  • Medications used to treat non-life-threatening conditions

Significance of Prior Authorization for Prescription Medications

Generally, most health insurance plans cover medications that physicians prescribe for patients. However, in some cases, health plans may require additional information from the physician before a prescribed drug is approved. The advantages of prior authorization for prescription medications include:

  • Helps improve quality of care and support evidence-based care by ensuring that the drug the physician is requesting is medically necessary and beneficial to the patient.
  • Reduces unnecessary procedures and health care costs, for e.g., health plans requires preauthorization for painkillers that are vulnerable to misuse and see that they are being used appropriately.
  • Prevents duplication of service, especially when the patient is being treated by multiple specialists.
  • Promotes cost control and reduces chances of overprescribing.
  • Promotes patient safety.
  • Lower healthcare costs.

Prior authorization requirements also support the goals of value-based care, according to a Health Payer Intelligence article. A 2020 America’s Health Insurance Plans (AHIP)survey reported that to create the list of drugs and procedures that require prior authorizations, most plans:

  • Discussed the list with specialists
  • Relied on providers’ clinical guidelines
  • Made use of vendor-provided guidelines that included provider perspectives
  • Used input from contracted providers
  • Considered perspectives from medical society and medical professional association members

The AHIP survey respondents said that prior authorization programs achieved what they were designed to do. Over 90 percent of the plans reported a positive impact on quality of care and affordability and 84 percent said that they also saw a positive impact on safety (

Preauthorization — Is there a Downside?

When a specific medication requires preauthorization from the insurance company, it can prove burdensome to providers and patients. For patients, it would mean that would have to wait for a certain period of time before their prescription is filled and also that they would have to pay for it if the insurance company denies the request for coverage. For physicians, prior authorization can be a barrier to delivering timely, patient-centered care. According to a 2021 report from The Journalist’s Resource, insurers have extended use of prior authorization requirements in response to rising costs of medicines. The report references a February 2020 Viewpoint article in JAMA by Dr. Jack Resneck Jr., a dermatologist at the University of California, San Francisco, which reported that prior authorizations were needed for about 24% of drugs in 2019 covered by the insurer-run Medicare pharmacy program (Part D plans), up from 8% in 2007. The article notes that the way insurers manage the process frustrates consumers and medical professionals. Because of frequently changing formularies and prior authorization requirements, physicians are not sure about which treatment options will be approved without delay. Patients approaching pharmacies to pick up medications and initiate treatment are sometimes surprised when they are informed that that their physician has to initiate further action to get the health plan’s approval.

Role of Insurance Authorization Services

Prior authorization can take days to process depending on the medication the physician prescribes and the insurance company requirements. Handling prior authorizations is a time-consuming and burdensome task for physicians. It involves a lot of administrative work and time, phone calls, and paperwork by both pharmacies and physicians. According to an American Medical Association (AMA) survey, 40% of physicians employ staff whose only job is to work on prior authorizations, and they spend approximately 13 hours per week completing them. Up to 44% of physicians reported that PA requests “often or always” hold up care, with 26 % reporting lengthy waits of three business days or more on average to receive PA decisions from health plans. Partnering with an insurance authorization company can ease the process for physicians. These companies have experts on board who will work with the provider to submit prior authorization requests promptly. Their streamlined, centralized processes will minimize errors. As insurance verification specialists have experience working with all government and private insurers and can ensure that prior authorization requests are submitted to meet the requirements of different plans. An experienced insurance authorization service provider can help practices reduce risk of denials and save time and resources required for getting prior authorizations, benefiting both physicians and patients.

Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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