Prior Authorization Reform Has Bipartisan Support, but is it Too Expensive?

April 25, 2024

The MMA’s top priority to reduce the use of prior authorization for a limited list of services continues to have bipartisan support at the Legislature. However, it is running into challenges with the cost of the reforms. 

Every bill that has a cost to a state program receives a fiscal note from the Minnesota Management and Budget Office. The Legislature is then required to allocate the money needed to pay for those costs. Because this is a non-budget year, there is very little new money available to spend. This is forcing legislative leaders to be creative in how prior authorization is addressed. 

Most of the cost related to prior authorization reform is to the Medical Assistance (MA) program and is related to how medications are financed. Minnesota receives significant revenues from drug companies through supplement rebates paid to get their medications on the preferred drug list. By prohibiting prior authorization for certain medications, patients will no longer be required to use the drugs on the preferred drug list and the state will lose the rebate revenue from the manufacturer. 

For example, a preliminary estimate from the Minnesota Department of Human Services said that the cost of prohibiting prior authorization for generic drugs and biosimilars would cost the state more than $100 million in lost rebate revenues. Even though the retail price of generic drugs is generally cheaper than brand name drugs, the net cost after rebates is not. While this may not make sense, the state is encouraging MA patients to use brand name drugs over generics to maximize rebate revenues. 

Because of the cost of these rebate revenues, the authors of the prior authorization legislation are being forced to scale back some of the provisions in the bill. For example, instead of prohibiting prior authorization for needed mental health medications, the bill will require that prior authorization decisions be made within 48 hours, instead of the current five-day timeline. 

The bill still contains language that says once a prior authorization is approved for a chronic condition, the approval does not expire unless the treatment standard changes. The bill also extends all prior authorization laws to the state’s public programs, which is currently not the case.  And it requires health plans to annually report data on how often they use prior authorization, approve requests and deny them. This will help leaders better understand whether prior authorization remains an effective tool or a barrier to care. 

Both the Senate and House omnibus health and human services bills have prior authorization language included in them, but in different forms. After these bills pass their respective floors, there will be a 10-person conference committee formed to meet and work out the differences. The MMA remains optimistic that some prior authorization reform will be included in the final package.