How Do Insurance Companies Control the Utilization of Medications?

I recently received the following questions from a trusted colleague who was preparing a talk about insurance company techniques to control costs. I thought it would be helpful to highlight these points below:

How do medical plans modify utilization of particular medications?

Insurance companies use a panel of experts (physicians, pharmacists, nurses) usually called a pharmacy and therapeutics (P&T) committee to make determinations about what medications will be on formulary.

This group will meet regularly to discuss the safety and efficacy of different medications for different clinical situations. Pricing decisions are typically not made by this group but if multiple medications are similarly effective, and one is much more cost effective those two medications may end up in different tiers or one may end up requiring a prior authorization (PA). It could also be the case that two medications are effective, but their cost is high and they both require a PA.

What is the place/position of prior authorizations (PAs) in a pharma company's or medical device strategies?

My cynical answer is that they modify the utilization of medications by forcing doctors to jump through too many hoops to comfortably prescribe the medication.

From an optometry specific perspective I suspect that the hoop of prior authorizations are enough not only prevent successful fulfillment of the prescribed medication, but they are actually what over time will prevent the medication from being prescribed in the first place. I don't blame the insurance company for this, they are simply modifying our behavior.

Let me propose the following scenario:

You prescribe a medication for a patient who has dry eye and that medication is completely appropriate based on your clinical judgment. You are busy seeing patients but e-prescribe has made the process of sending medications much more seamless so that doesn’t take long, perhaps 1 minute of your time.

Then you are on to the next patient and about 30 minutes later you get a fax from the pharmacy stating that the medication you prescribed requires a prior authorization (PA), AND you need to visit a website or call a 1800 number to provide additional information. When you do this they are typically looking for the following specific information:

  • Has this medication worked for the patient in the past

  • What is the diagnosis?

  • What testing have you done to support the diagnosis?

  • What other treatments have been tried and failed?

If you don’t write many prescriptions (like the vast majority of ODs – a topic for another time) and you don’t have a mechanism in place with your staff to handle these PAs you may try to fumble through them, but if you don’t know what information the insurance company is looking for, this process can be challenging and time consuming.

However, if you do know what they want it can take about 1 minute of staff time.

Over time, I suspect that this controls utilization for many doctors because when they think of prescribing that specific medication, they are immediately hit with the gut reaction of a painful PA process, so they will look for other treatments or simply not address the condition.

These mechanisms control cost directly, by preventing unnecessary prescriptions from being filled but also, I suspect, indirectly by deterring the prescription in the first place.

What can doctors do to minimize claims denials?

My advice is to:

  • Designate a staff member to handle PAs.

  • Understand the diagnosis codes and clinical testing that support the prescription of the medications you are prescribing.

  • Know the step therapy (like artificial tears that have not helped the patient) that the insurance companies like you to try prior to writing for a chronic medication.

Have a great week~ Chris