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What do prior authorization and step therapy mean in Part D drug plans?


Some Medicare Part D prescription plans restrict coverage for certain medications, even if they’re on the plan’s list of covered drugs, which is called a formulary.

The three most common restrictions are:

  • Prior authorization
  • Step therapy
  • Quantity limits

Part D plans set these restrictions, not Medicare, and they vary from plan to plan. This means you may need to get special permission before your plan will cover a drug or dosage.

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What is prior authorization in Medicare Part D?

With prior authorization, you or your doctor must contact the plan for permission before a pharmacy can fill certain, generally expensive, prescriptions. Your physician must verify that the drug is medically necessary for your specific situation. In some cases, a plan may require prior authorization because a powerful drug poses safety concerns if taken inappropriately, used for too long or prescribed for a medical condition other than its original purpose.

Medicare Advantage also uses it. Part D, which you buy from a private insurer that Medicare regulates, isn’t the only part of Medicare that may require prior authorization. Most Medicare Advantage plans, also offered by private insurance companies with Medicare approval, require prior authorization for some prescriptions you take and drugs administered in your doctor’s office.

The key question that insurance companies want answered is: Why was this particular drug prescribed instead of an alternative that might be less expensive or considered safer? 

A plan may also require prior authorization if the drug could be covered under Medicare Part A, Part B or Part D and the company wants to know more about the circumstances under which the drug was prescribed.

  • Medicare Part D usually covers a drug you take in your own home.

If your plan agrees to treatment under Part D, it will cover the drug. If not, your doctor should file your claim with Medicare under Parts A or B.

What is step therapy in Medicare Part D?

Step therapy often requires you to try a less expensive drug that’s proven effective for people with your condition before the plan will cover a more expensive, prescribed drug, even if both drugs are on the plan’s formulary. For example, some plans may require you to try a generic drug first and then a less expensive brand-name drug before they’ll cover a more expensive brand-name drug.

Your doctor can contact the plan to request an exception if they believe you’ll experience a reaction to the less expensive drug or it will be less effective.

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What are quantity limits in Medicare Part D?

Quantity limits are imposed when your doctor prescribes a dosage or quantity that’s higher than the plan considers normal to treat your condition or one that’s prescribed for a long period of time. The plan won’t cover the amount prescribed unless your doctor asks for an exception and shows that the extra medication is necessary to treat you effectively.

What happens if I’m still denied the coverage I need?

If you or your doctor asks for an exception to the restriction, your plan should typically make a decision within 72 hours — or 24 hours if your doctor asks for an expedited decision because your health could be in danger if you’re delayed.

If the request is denied, your plan must instruct you in writing on how to file an appeal.

In all, Medicare has five levels to its appeals process, which can culminate in a federal district court review:

1. Redetermination from your drug plan.

2. Review from an independent review entity.

3. Hearing before an administrative law judge in the Office of Medicare Hearings and Appeals.

4. Medicare Appeals Council review.

5. Federal court review if the dollar amount of your case is at least $1,840 in 2024.

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How can I find which plans restrict my drugs?

Before you choose a Part D plan for the year, find out whether it has any restrictions on your drugs. Because each plan decides which drugs it will restrict, some drugs may be automatically covered while others may require prior authorization. You can get a list of the plan’s drugs requiring prior authorization, step therapy or quantity limits within the insurer’s plan documents, which are usually posted on its website.

You can also see if the plan has any restrictions on your drugs when comparing Part D plans in Medicare’s Plan Finder. After typing in your ZIP code and identifying Part D plans, add your drugs and preferred pharmacies. You may find that your drugs and pharmacies are already listed if you log in to your online Medicare account before accessing the Plan Finder.

In the Plan Finder, you’ll see a list of plans available in your area with an estimate of your medications’ yearly drug and premium costs. In each plan, under Drugs, click on View drugs & their costs and scroll below Estimated total monthly drug cost. Then click + View more drug coverage.

If you scroll down to Other drug information, you’ll see a checklist for your drugs with sections for prior authorization, quantity limits or step therapy. A Yes will be noted in the boxes that have restrictions for your drugs. 

Keep in mind

Some plans allow you to carry over coverage granted through an exception from year to year. Others require you to request an exception for the same drug annually or in some cases more frequently.

If your current plan has granted you an exception to use your drug and you’re considering switching to another plan during open enrollment, find out if the other plan places restrictions on the same drug. 

If you’re already taking a medication, you have the right to a 30-day refill within the first 90 days of enrolling in a new plan regardless of whether the plan places restrictions on the drug or doesn’t cover it at all. This grace period, also called a “transition refill,” gives you time to work with your doctor to change to an alternative drug or request an exception.

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