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How Pharmaceutical Companies Could be Affected by the AMA’s Prior Authorization and Utilization Management Reform Proposal

Prior authorization (PA) for medications, devices and services is viewed as a valuable utilization management tool by payers but is a long-standing pain point for providers, pharmacists and the pharmaceutical industry. A 17-member coalition of powerful stakeholders — led by the American Medical Association (AMA) — recently drafted a reform proposal based on 21 Principles.

Why should pharmaceutical companies care? On first blush, the 21 Principles seem focused on payers. However, pharmaceutical companies should look again. If implemented — and we believe they will be — the 21 Principles will significantly affect the accuracy and transparency of how medications are prescribed and reimbursed. Their adoption also will have a profound and sustained impact on the use of electronic health records (EHRs), utilization management, prior authorization and related provider workflows. For example, their adoption could:

  • Drive adoption of electronic prior authorization (ePA). Although ePA adoption in EHRs has been slow, implementation of the 21 Principles will kick-start use of the transaction in several ways.

First, a very powerful stakeholder group developed the 21 Principles, which will give them traction among policymakers. As a result, many (or all) of the 21 Principles could end up being mandated through regulation, either Federally or at a state level. This will give EHR vendors further impetus to make critical upgrades so their systems accept transactions using the ePA standard from the National Council for Prescription Drug Programs (NCPDP), as described in Principle #12. NCPDP’s ePA standard enables up-front prior authorization during electronic prescribing from an EHR. This is quicker and more efficient than the current “retrospective” process. Retrospective PA is disruptive to workflows, time consuming and often results in patients going without medications or getting a different therapy than what was originally ordered. Moving to ePA benefits practices and the pharmaceutical industry by creating more time for providers to spend with patients and less time on administrative duties.

  • Improve formulary accuracy and completeness. It is widely believed that the formulary information available to prescribers in the EHR is incomplete or inaccurate. When the provider doesn’t know a PA is required the patient finds out at the pharmacy, resulting in lost prescriptions. Having accurate formulary information isn’t much of a stretch because payers and vendors can build on capabilities that currently are available but not widely or consistently used. Although EHRs have been programmed and certified to show proper formulary data, many payers are not providing robust information. Of course, this only works on pharmacy benefit medications because medical benefit medications are left out of the ePA process.
  • Improve accuracy and transparency of coverage restriction data. There also is a widely-held belief that coverage and restriction data aren’t complete or accessible. Principles #1 and #8 suggest that coverage restrictions and supporting documentation requirements should be complete, transparent, consistent and electronically accessible by the EHR. In addition, the 21 Principles suggest that criteria should be based on medical literature and grounded in science and not cost alone. For the pharmaceutical industry, making the criteria and supporting documentation used by payers more publicly visible could create new pressure from medical societies and patients for timely updates as new criteria arrive. Such transparency also could create a better understanding by providers of the criteria that underlie a payer’s decisions to use a medication and/or appeal a denial.
  • Create a shift from payer portals to electronic transactions. Today, most PA is done via payer portals, which provide an electronic door to paper-based processes. In addition to the hassles and inefficiencies of paper, finding and accessing portals for various payers is not integrated into the EHR workflow. Adoption of the 21 Principles will move everyone toward established transactions in the NCPDP Script Standard for pharmacy benefit products and ASC X12 278 for medical benefit products and away from independent portals, either payer-specific or multi-payer. For the pharmaceutical industry, automation of the provider workflow facilitates use of drugs with PA requirements. Portals, as seen with reimbursement hubs, create barriers to high use because they are outside providers’ workflow.
  • Standardize common ePA requirements. Leveraging ePA to reduce providers’ burden and improve accuracy is a theme throughout the 21 Principles. Encouraging payers to standardize criteria (Principle 18) has ultimately been at the core of creating more efficiency for physician practices. This can be done, for example, by having better, standardized and more specific requests for information that are built into the ePA process, with answers that could be extracted automatically from the EHR. Standardized questions would lower provider barriers in addressing PA requirements while increasing the precision of the responses pulled directly from medical records. Reducing barriers for selecting medications with PA for appropriate patients is in the pharmaceutical industry’s best interest.

Going forward. Point-of-Care Partners (POCP) applauds the work of the AMA and the coalition for getting the conversation restarted on how to balance patients’ needs for quick access to appropriate therapies and the needs of payers and pharmacy benefit managers to control costs and utilization. We also acknowledge the work and foresight of NCPDP and others, which supports the infrastructure needed to make PA a totally electronic process.

POCP also understands the workflows and pain points involved in switching to ePA — both as national experts in the issue as well as conveners of the NCPDP task group on ePA. Let us know how we can put our expertise to work for you.

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Brian Bamberger

Brian Bamberger

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