Prior authorization requires the prescriber to receive pre-approval for prescribing a particular drug in order for that medication to qualify for coverage under the terms of the pharmacy benefit plan. Guidelines and administrative policies for prior authorization are developed by pharmacists and other qualified health professionals.  Each managed care organization develops guidelines and coverage criteria that are most appropriate for their specific patient population and makes its own decisions about how they are implemented and used. Well-designed prior authorization programs consider the workflow impact on health care system users and minimize inconvenience for patients and providers.

Prior authorization can be used for medications that have a high potential for misuse or inappropriate use. For some categories, health plans may limit the coverage of drugs to FDA approved uses and require a prior authorization for off-label indications. An example of an off label use could be a physician prescribing a powerful opiate that has only been approved by the FDA to treat breakthrough cancer pain, in a patient that has chronic back pain. In this case, there is insufficient clinical evidence supporting the use of the medication for non-cancer purposes and prescribing such a medication could pose a serious safety risk for the patient. Prior authorization would be used to limit coverage in this situation to those patients where safety and appropriate use has been documented.