Health insurance companies impose management practices for controlling health care expenditures.  Regarding pharmaceuticals, pharmacy benefit managers utilize a cost savings technique known as step therapy protocols, or fail first protocols as part of their health coverage approval process.  These control measures stipulate that prescription drugs may only be utilized in a specific sequence in order to receive authorization or payment of health care benefits for needed services.   The step therapy business strategy enables the insurer to deny coverage for effective medications, basing decisions on cost rather than patient need.  In response to consumer health advocacy concerns, states have introduced legislation to regulate these insurance management practices.   The legislative initiatives enable the prescribing provider to override the step therapy protocols of the plan sponsor.  If the patient and the prescribing provider comply with certain conditions, the plan sponsor is mandated to authorize coverage for the requested prescription drug.  The latest account indicates that such reform legislation has been approved in fourteen states and is pending in twelve additional states (American Academy of Dermatology, 2018).   Prior research to examine provisions associated with the regulation of the step therapy practices within the United States has been limited. To address this gap in the literature, this paper will examine the regulatory exceptions to step therapy practices including clinical review criteria, patient protection measures, explicit and transparent process requirements, conflict of interest disclosure and exemption provisions.

Keywords: health insurance, step therapy protocol, tiered formularies, fail first protocol, prescription drug coverage