• Sustainability
  • DE&I
  • Pandemic
  • Finance
  • Legal
  • Technology
  • Regulatory
  • Global
  • Pricing
  • Strategy
  • R&D/Clinical Trials
  • Opinion
  • Executive Roundtable
  • Sales & Marketing
  • Executive Profiles
  • Leadership
  • Market Access
  • Patient Engagement
  • Supply Chain
  • Industry Trends

Does Formulary Contracting = Patients Will Get Their Prescriptions?


Pharmaceutical Executive

A look at the communication disconnect between contracting with managed care plans and pharmaceutical benefit managers (PBMs) and the imposition and implications of prior authorization (PA) requirements.

When considering whether a health plan will actually pay for a pharmaceutical product that has been prescribed for a patient, it is important to understand that a product that is “covered” under contracts with the various plans and pharmacy benefit managers (PBMs) may not be readily available to their insured patient members. All too often, it is difficult for patients to obtain a product that is covered by insurers and PBMs because of the imposition of prior authorization (PA) requirements, which have practical, real-world implications for health care providers and their staff.

As a case in point, a product manager recently stated that “we don’t have a PA problem, since we are under contract with 96% of the marketplace.” While there is some comfort in being on the approved formulary for a health plan or PBM, providers may still face significant market access restrictions when they prescribe the product, often resulting in lost product sales.

Being under contract means that a manufacturer has negotiated a position on the plan’s formulary, which no doubt is better than “Product Not Covered” or “Benefit Exclusion.”  However, with multi-tiered formularies being the norm today, branded products will more likely be placed in a second, third or more undesirable tier position, which will prompt a prior authorization or step edit before the plan or PBM adjudicators will pay for the medication.

PA is the requirement by a patient’s pharmacy benefit plan that providers must seek-and get-approval before a prescription product can be reimbursed for dispensing. In many instances, this requires that the provider enter specific clinical information or test results justifying the PA request and/or provide confirmation that one or more preferred formulary alternatives have been tried. 

From the perspective of a pharmaceutical brand, there are factors to keep in mind.

  • First, the incidence of required PAs is increasing. It is estimated that there are 300 million prescription PAs per year in the United States-that is one every six seconds.  According to a 2017 survey by the American Medical Association, 88% of prescribers report that PA burdens have increased over the last 5 years.1

  • Second, when a PA is required only 29% of prescriptions are filled with the originally prescribed product. A substitute product is dispensed 30% of the time, and the patient forgoes treatment altogether 40% of the time.2

  • Third, PAs are disruptive to practice workflow. The previously mentioned AMA survey indicated that 86% of providers characterized the PA burden as high or very high and 91% reported care delays. For busy practices, the reality is that PA requests are often not submitted.

Simply put, brand contracting for market access is not a “one and done” strategy. In today’s reality, market access is a two-step process wherein contracting gets you into the game, but usually with the restrictions related to step therapy or other clinical documentation requirements mentioned earlier. To not be benched, it is also necessary to have strategies and tactics that motivate practices to submit PA requests-and that facilitate their efforts to secure PA approvals-in order to maximize the number of patients who receive the originally prescribed product.

For brand teams and product managers, it is critical to think about PA requirements from the provider’s point of view.

  • Look closely at what your product’s contract status really means. If the product is covered on formulary, what tier is it on?  What are the specific PA requirements for that tier? Are the PA requirements similar or different across plans?

  • What is the PA burden that the practice faces from the perspective of both the prescriber and the office staff who usually process PA requests? Is a PA required in all or most cases? What are the key criteria for approval?

  • What percent of prescriptions that are denied at the pharmacy because of PA requirements end up being filled as prescribed? Based on data from both pharmacy and electronic medical records, the percentage is often in single or low double digits. How can you identify those practices with potential to improve their support of PAs? 

  • How can practices be motivated to submit PA requests? How can your product investment effectively support practices to efficiently process PAs in terms of ease of submission, follow up with the PBM, updates on PA status, handling of requests for additional information, and support of appeals?

Product contracting for pharmaceutical products is important, but it is usually not sufficient by itself to assure broad market access. In some ways, it can be likened to buying a ticket to a major sporting event-it does get you inside the doors of the arena, but the price can be high (think rebates) and you might be up in the rafters and maybe have an obstructed view. If you can see the scoreboard at all, it may not show the results that you desire.


1. https://www.ama-assn.org/sites/ama-assn.org/files/corp/media-browser/public/arc/prior-auth-2017.pdf

2. Point of Care Partners. Electronic Prior Authorization for Medications: The Time is Right for Plans, PBMs and Other Payers. February 2012, Hanson KA. Journal of Managed Care Pharmacy. An Analysis of Anti-Hypertensive Use Following Initially Rejected Pharmacy Claims for Aliskiren. September 2009. Vol. 15, No. 7. pp. 573-574


Dan Rubin is president and CEO of PARx Solutions

Related Videos
Related Content