Prescription drug costs are a major concern, and insurance companies use various methods to manage these expenses and ensure appropriate drug utilization. One common tool employed by health plans is step therapy, a utilization management requirement that influences which medications a patient can access first. For Medicare beneficiaries, understanding this system is key to obtaining coverage for needed treatments. This article explains the mechanism of step therapy and how it is applied to prescription drug coverage within the Medicare program.
Defining Step Therapy
Step therapy is a protocol requiring a patient to attempt treatment with one or more lower-cost medications before the health plan covers a more expensive, non-preferred drug. This practice is often called a “fail first” policy because the patient must demonstrate the initial drug was ineffective or caused unacceptable side effects before the plan approves the prescriber’s original choice. The goal is to encourage the use of cost-effective alternatives, such as generic drugs or biosimilars.
The initial medication is known as the “step drug,” typically a generic or preferred brand-name drug on a lower cost-sharing tier. The non-preferred drug, which the doctor initially prescribed, requires authorization for coverage. If the patient successfully responds, the plan saves costs and the patient benefits from a lower co-payment. If the patient does not respond or experiences an adverse reaction, this documented failure provides the medical justification needed to move to the next “step.”
Application within Medicare Coverage
Step therapy is a utilization management tool used by two main components of the Medicare program: Part D Prescription Drug Plans and Medicare Advantage Plans (Part C). Part D plans cover most self-administered prescription drugs and designate certain medications on their formulary as subject to step therapy. These plans use this requirement to control costs across the range of oral medications and injectables covered under the Part D benefit.
Medicare Advantage plans (private plans covering Part A and Part B services) also apply step therapy, specifically for physician-administered medications covered under Medicare Part B. These Part B drugs were not previously subject to this requirement until a policy change allowed Advantage plans to implement it. The specific drugs and the number of steps required vary significantly, making it important for beneficiaries to review their plan’s formulary documents.
A plan’s formulary clearly marks which drugs are subject to step therapy. The plan will not grant coverage for the higher-cost option until the beneficiary has tried and failed the designated step drug. This process adds a layer of prior authorization, requiring specific clinical evidence of the failure of the preferred alternative before covering the prescribed treatment.
Navigating the Patient Process
When a doctor prescribes a medication subject to step therapy, the patient receives notification that a lower-cost alternative must be tried first before the plan covers the originally prescribed medication. The patient and the prescribing physician must then decide whether to accept the plan’s requirement or immediately challenge it.
If the patient agrees to the protocol, the doctor writes a new prescription for the designated step drug, which the plan covers immediately. The patient begins the required trial period to determine if the medication is effective. This period must be long enough to document whether the medication provides the expected therapeutic benefit or causes unacceptable side effects, constituting a clinical failure.
Once the step drug is documented as ineffective, the prescribing physician submits a prior authorization request for the initially prescribed, non-preferred medication. This request must include detailed clinical documentation. The plan reviews this documentation to confirm the step therapy requirement has been fulfilled before granting coverage.
Requesting Exceptions and Formal Appeals
Patients and their doctors do not always have to follow the step therapy process if the required step drug is medically inappropriate. If the preferred drug is contraindicated, previously failed under a different plan, or likely to cause a severe adverse reaction, the prescriber can request a coverage exception. This exception asks the plan to cover the non-preferred drug immediately based on medical necessity.
The prescriber must submit a supporting statement providing specific medical justification, explaining why the plan’s preferred alternatives would be ineffective or harmful. For standard exception requests, the plan must provide a decision within 72 hours of receiving the supporting statement. If the patient’s health could be seriously jeopardized by waiting, an expedited request requires the plan to respond within 24 hours.
If the plan denies the exception request, the patient has the right to initiate the appeals process. This begins with a request for Redetermination, the first level of appeal. Should the plan uphold its denial, the case proceeds to the second level, involving an independent review by an outside entity (the Independent Review Entity, or IRE).