What is meant by "preauthorization" in pharmacy billing?

Preauthorization in pharmacy billing refers to the process where an insurer requires approval before a medication can be dispensed or prescribed to a patient. This step is often necessary for specific medications, particularly those that are costly, have certain restrictions, or are not typically covered under a patient’s health insurance plan. The goal of preauthorization is to ensure that the medication is medically necessary and aligns with the insurer’s criteria prior to incurring costs, both for the insurer and the patient. This process helps manage healthcare costs and ensure appropriate use of medications.

Options discussing standard approval processes or any type of review after treatments take place do not accurately define preauthorization, as they imply actions occurring after the medication is received. Additionally, categorizing preauthorization as optional contradicts its crucial role in the authorization process for certain prescriptions. Preauthorization is a critical step intended to control healthcare spending and validate the clinical necessity of treatments before they are carried out.