Fact Sheets

Medicare Advantage Prior Authorization and Step Therapy for Part B Drugs

Today, the Centers for Medicare & Medicaid Services (CMS) introduced much-needed competition and negotiation into the market for physician-administered and other Part B medications that will result in better deals and lower drug costs for patients. As part of the agency’s ongoing activities to deliver on President Trump’s promises outlined in his American Patients First Blueprint, CMS will provide Medicare Advantage plans the option of applying step therapy for physician-administered and other Part B drugs in a way that lowers costs and improves the quality of care for Medicare beneficiaries. Medicare Advantage (MA) plans will have the choice of implementing step therapy to manage Part B drugs, beginning January 1, 2019 as part of broader care coordination activities that include patient rewards and incentives. Currently, there are more than 20 million beneficiaries enrolled in MA plans.

What is Step Therapy?

Step therapy is a type of prior authorization for drugs that begins medication for a medical condition with the most preferred drug therapy and progresses to other therapies only if necessary, promoting better clinical decisions. For example, using step therapy plans could ensure that a senior who is newly diagnosed with a condition begin treatment with a cost-effective biosimilar before progressing to a more costly drug therapy should the initial treatment is ineffective. By implementing step therapy along with care coordination and drug adherence programs in MA, it will lower costs and improve the quality of care for Medicare beneficiaries.

The New Guidance

Under Part B, traditional Medicare generally pays clinicians a percentage (average sales price plus a 6 percent add-on) above the average sales price for drugs and biologicals administered in a doctor’s office, such as injections and infusions. This payment method leads to little negotiation to reduce the price of these drugs. Existing CMS guidance discouraged plans from using prior authorization for Part B drugs and prohibited step therapy. As a result, Medicare Advantage plans had little ability to negotiate on behalf of beneficiaries to get better value for Part B therapies. By rescinding this guidance, patients enrolled in MA plans and taxpayers will get a better deal. These negotiations may also decrease the Average Sales Price for Part B drugs, which would likely decrease the copayments made by people with traditional Medicare.

Shared Savings

Part B step therapy requirements may reduce costs for both the beneficiaries and MA plans. MA plans will be required to pass savings on to beneficiaries through the rewards furnished as part of the drug management care coordination program. Rewards passed on to the patient will be required to be equivalent to more than half the amount saved on average per participant. 

Access to Part B Drugs

MA plans will still be required to cover all medically necessary Part B drugs for beneficiaries.  The beneficiary can ask the MA plan for an exception if they believe they need direct access to a drug that would otherwise only be available after trying an alternative drug.

Additionally, MA plans will ensure that new step therapy requirements do not disrupt ongoing Part B drug therapies for beneficiaries. Under this new policy, step therapy can only be applied to new prescriptions or administrations of Part B drugs for beneficiaries that are not actively receiving the affected medication. This means that no beneficiary currently receiving drugs under part B will have to change their medication.

Step Therapy Implementation and Beneficiary Protections 

There are several programmatic features that will protect beneficiaries and ensure that they benefit from this new flexibility. First, beneficiaries will have the opportunity during the upcoming annual Medicare Open Enrollment period between October 15, 2018 and December 7, 2018, to choose which Medicare Advantage is the best for them, including the option to choose a plan that includes step therapy if one is available in their area.

In addition, if Medicare Advantage enrollees, including new Medicare Advantage enrollees, are not satisfied with their Medicare Advantage plan, they have an opportunity to make a one-time election to go to another Medicare Advantage plan or Original Medicare from January 1st through March 31st annually. Individuals using this opportunity to make a change may make a coordinating change to add or drop Part D coverage.

MA plans participating in Part B step therapy must disclose that Part B drugs may be subject to step therapy requirements in the plan’s Annual Notice of Change (ANOC) and Evidence of Coverage (EOC) documents that are provided to enrollees prior to the Medicare Open Enrollment period to assist them in making plan selections for the upcoming year.

MA plans that choose to offer Part B step therapy will must couple step therapy with new patient-centered care coordination services for beneficiaries as part of a drug management care coordination program. Care coordination must include discussing medication options with beneficiaries, providing beneficiaries with educational material and information about their medications, and implementing adherence strategies for beneficiaries on their medication regimen. Furthermore, MA plans will furnish rewards to beneficiaries in exchange for their participation in the drug management care coordination program.

Additionally, MA plans are subject to penalties if they do not spend at least 85% of revenue on healthcare services and quality improving activities. This requirement provides a strong incentive for plans to invest step therapy savings on healthcare and other activities that benefit enrollees.

Finally, if a beneficiary is enrolled in a plan offering step therapy, they can ask the MA plan for an expedited exception if they believe they need direct access to a drug that would otherwise only be available after trying an alternative drug. Exception requests will be completed as expeditiously as the beneficiary’s health condition requires, generally within 72-hours.

If a plan denies a beneficiary’s request, the beneficiary has the right to appeal and CMS will be monitoring appeals activity to ensure beneficiaries’ requests are appropriately evaluated. Plans are required to provide enrollees with a written notice of its determination and information on how to appeal the decision. More information on the Medicare Advantage appeals process is available at:

To view the memo that was sent to Medicare Advantage plans, please visit: