What is prior authorization (PA)?

Prior authorization (PA) is a plan requirement that a prescriber justify the medical necessity of a drug before the plan will cover it. The prescriber typically submits a clinical rationale, supporting documentation, and sometimes a step-therapy history.

PA adds friction to prescribing and is one of the strongest signals of formulary placement intent: a drug with high PA counts across plans is one the plan is actively discouraging. A drug with zero or near-zero PA counts is freely available.

For plan sponsors evaluating leak opportunity, PA friction is a key filter. Drugs with deep generic competition AND low PA counts represent the cleanest savings opportunities because moving utilization toward the generics doesn't require overcoming a PA process. Rivaroxaban is the canonical example: 17 generic manufacturers, $0.98 NADAC floor, only 1 of 329 plans requires PA.

PA requirements can sometimes be lifted contractually at renewal — particularly for molecules where the PA exists primarily to channel utilization toward higher-rebate brand alternatives rather than for clinical reasons.