Prior Authorization of Pharmaceuticals: Health Policy in Search of Evaluation. (2001 Best Clinical Paper Award Recipient)

Article excerpt

Currently in the US there is a strong emphasis being placed on health policy that ensures access to high quality medical care but with due consideration of costs. Unfortunately, economic analysis, which includes enumeration of costs and benefits of care, is poorly applied and underutilized in these policy decisions (Reinhardt, 1997). A recent example is the proposal placed before Congress recommending the use of pharmaceutical benefit managers (PBMs) as agents, and their techniques as the means, of achieving pharmaceutical cost containment in Medicare.

Prior authorization (PA), specifically identified in the Medicare drag benefit proposal, is one of the several techniques employed by PBMs to influence drug dispensing and prescribing (Grabowski & Mullins, 1997). PA is an administrative technique designed to control the drugs that physicians and other authorized individuals may prescribe. The control can be to preempt a particular drug of choice, limit the amount of a drug supplied per prescription, or manage an entire therapeutic class according to criteria defined by a controlling agency, usually an insurer. The health care literature yields little information on PA programs, however (Grabowski & Mullins, 1997; Kane 1997; Lipton et al. 1999; Huskamp et al. 2000). There are no rigorous tests of the underlying assumptions inherent in its process, and no study of its effect on the utilization of drugs and subsequent costs of care, even though reduction of total drug spend is evident (Soumerai et al., 1993; Monane et al., 1998; MacKinnon & Kumar, 2001). In order to be judged cost-effective there must be a consideration of administrative costs, the additional benefits gained and the consequences incurred (added patient suffering or morbidity due to a limited treatment choice, for example) with its use. The failure to do so is due, in part, to what Reinhardt describes as the untested or crudely tested medical theories that drive most decisions regarding treatment methods and pharmacy formularies (Reinhardt, 1997).

This paper discusses an early qualitative investigation into PA programs used by various managed care organizations. We sought to obtain information regarding several aspects of PA programs including the decision rules used to determine both the need for a PA for a particular drug product, the costs of the process and the means used to audit and ensure its cost-effectiveness.


A semi-structured interview technique was used to elicit information from a purposive sample of individuals identified by a large pharmaceutical manufacturer as employees of organizations actively using prior authorization for formulary management. Specifically, individuals from PBMs, health maintenance organizations (HMOs), and preferred provider organizations (PPOs) throughout the US were invited to participate in telephone interviews of about 30-45 minutes in length regarding their organization's use of PA for pharmaceutical products. All interviews were conducted by the same researcher (SW) on a date and time designated by the interviewee.

Questions posed were intended to stimulate an open discussion of the PA process. There were four underlying concepts that guided the questions: the rationale for the use of PA (Why is it done?); the criteria for decision-making (How is it done?); the effectiveness of the process (Does it work?); and the cost of the process (How much does it cost and is it cost-effective?). The questions were reviewed by the study sponsor and then pilot tested with knowledgeable individuals known to the researchers. Revisions suggested by these contacts were incorporated into the final interview strategy. These outside experts also assisted in the identification of probe strategies to elicit more in-depth responses and occasionally provided clarification of points made during interviews as the study progressed.


Initial contact was made with 49 key informants. …