Step Therapy

Key facts

Also called

Fail first, or a step edit when enforced automatically at the pharmacy

Used in

Commercial plans, Medicare Part D, Medicare Advantage and Medicaid

Medicare Advantage Part B drugs

Allowed since 2019, only for patients not already taking the drug

State laws

Many states regulate exception processes for state-regulated plans

What is step therapy?

Step therapy is a form of utilization management. A plan sets a sequence of treatments for a condition, and a drug later in the sequence is covered only after the patient has tried an earlier step, commonly a generic, a biosimilar or a preferred brand, and that treatment did not work, caused side effects or was otherwise unsuitable.

Plans say step therapy steers patients to effective lower-cost options first. Patient and physician groups say it can delay the right treatment, especially for patients who switch plans and are asked to repeat steps they already took.

How step therapy works

When a prescription is submitted, the plan or its pharmacy benefit manager checks claims history for the required earlier drugs. If the history shows them, the claim can pass automatically. If not, the claim is rejected and the prescriber must document prior use or request an exception. State step therapy laws and plan policies commonly recognize exceptions such as:

• The required drug is contraindicated or likely to cause harm.
• The patient already tried the required drug, including under a previous plan, and it did not work.
• The patient is stable on the prescribed drug.
• The required drug is expected to be ineffective given the clinical characteristics of the patient.

Rules for step therapy

Medicare Part D plans can use step therapy in formularies reviewed by CMS. Since 2019, Medicare Advantage plans may also apply step therapy to Part B drugs, such as physician-administered infusions, but only for patients who are not already on the drug.

Many states have enacted laws requiring state-regulated plans to offer a clear exception process with response deadlines. Those laws do not reach self-funded employer plans governed by ERISA, and federal legislation to extend similar protections to those plans has been introduced repeatedly in Congress.

Why step therapy matters

Step therapy shapes launch strategy and competition. A new brand placed behind one or two older products reaches patients later in their treatment, which shrinks its addressable population and slows uptake. Generic and biosimilar entry often triggers new step requirements that shift market share quickly. Pricing and access analysts track step edits by plan and channel, and commercial teams use them to explain why prescribing differs between regions with similar patient populations.