Prior authorization (PA) is one of the most visible friction points in pharmacy benefits. When a medication requires prior authorization, delays or unclear communication can frustrate employees, burden HR teams with escalations, and create gaps in care.

For benefits leaders evaluating a pharmacy benefit manager (PBM), prior authorization performance is a revealing indicator of how well the entire PBM relationship will work. Rather than asking which PBM is "best," employers should focus on measurable criteria: How quickly does the PBM process requests? How transparent is the reporting? How fair and accessible is the appeals process? How well does the PBM keep members informed?

Let's explore how you can optimize your PBM evaluation for member experience using the prior authorization process as a core criteria.

What Prior Authorization Is and Why Pharmacy Plans Require It

Prior authorization is an approval pharmacy benefit plans can require before covering certain medications. It is one of several utilization management tools that help employers manage drug spend while ensuring members receive clinically appropriate care.

Plans typically require prior authorization for high-cost drugs, specialty medications, or drugs with a lower-cost therapeutic alternative. The goal is to confirm that a prescribed medication meets the plan's clinical criteria before the plan pays for it. This protects the plan from unnecessary spend and directs members toward treatments with established clinical support that are also more cost effective at the pharmacy counter.

Electronic prior authorization (ePA) allows prescribers to submit requests and receive decisions through integrated systems, reducing manual work and delays. Understanding key pharmacy benefit terms, like PA and ePA, helps benefits leaders navigate these conversations with their PBM.

How the Prior Authorization Process Works

The prior authorization process follows a structured workflow. While details vary by PBM and plan design, the general steps are consistent:

1. A medication is flagged. If a member goes to fill a medication with PA requirements, it will be flagged and sent back to the prescriber for more information. The prescriber then sends the PBM relevant clinical information, such as diagnosis, treatment history, and justification for the medication.

2. PBM clinical team reviews the request. The PBM's clinical reviewers, typically licensed pharmacists, evaluate the request against the plan's clinical criteria.

3. Decision is returned. The PBM issues a decision: approved, denied, or requesting additional information.

4. Member and prescriber are notified. Both parties receive the decision, with next steps if the request requires action.

5. Appeal path if denied. If a request is denied, the prescriber or member can submit an appeal with additional clinical documentation.

Standard prior authorization requests follow a routine timeline, while urgent requests for time-sensitive medications receive expedited review. Employers should ask their PBM to define both timelines and report against them as a gauge of performance.

The Criteria That Separate a Strong PA Program

A well-run prior authorization program is measured by more than speed. Turnaround matters, but so does how the PBM communicates decisions, handles appeals, and reports on PA activity. Employers should evaluate how a PBM performs across four criteria: turnaround time, approval and denial decisions, transparency and reporting, and member communication.

Turnaround Time

Faster prior authorization decisions reduce delays in therapy and minimize the window in which members go without prescribed medications. For employers, extended turnaround creates member frustration and can generate HR escalations.

A strong PBM should clearly define standard and urgent turnaround expectations and report actual performance against those benchmarks. At SmithRx, standard prior authorization requests averaged a 3-day turnaround in 2025, and urgent requests were resolved in under 24 hours. These benchmarks give employers a concrete reference when comparing PBMs.

Approvals, Denials, & Fair Appeals Processes

Approvals and denials should follow the pharmacy benefit plan's clinical criteria, not arbitrary judgment. A strong PA program makes the criteria transparent and applies them consistently.

Denials are not inherently a sign of a poor program. Some requests do not meet clinical criteria, and a well-run program should deny those appropriately. What matters is that the criteria are clear, decisions are documented, and the appeals process is accessible and timely.

When a request is denied, the member or prescriber should have a straightforward path to appeal with additional clinical documentation. The PBM should process appeals promptly and communicate the outcome clearly. At SmithRx, the average prior authorization approval rate was 75.5% in 2025, with both approvals and denials following established clinical criteria.

Transparency and Reporting

Employers often lack clear visibility into what requires prior authorization and into PA volume and outcomes reporting, which makes it difficult to assess whether prior authorization is achieving its intended goals. According to Business Group on Health guidance on prior authorization oversight, employers can work with their PBMs to set PA requirements and monitor them.

To close that visibility gap, employers should require access to PA data, including total request volume, approval and denial rates by drug category, appeal outcomes, and turnaround times. This reporting supports informed plan decisions and helps identify opportunities to refine PA requirements. Understanding the reporting employers should expect from a PBM is essential when evaluating potential partners.

Member Communication and Experience

A strong prior authorization program keeps members informed at each step. Opaque PA processes are a common source of member frustration and a frequent reason large employers switch PBMs.

At SmithRx, our member-support agents and Patient Advocates guide members through the PA process, coordinate with prescribers, and provide clear next steps. The SmithRx Member Portal surfaces real-time prior authorization status, displaying whether a request is Approved, Partially Approved, Denied, or Not Required, with alerts so members are never left wondering.

How PBM Incentives Shape Prior Authorization

A PBM's compensation model can influence how prior authorization and formulary decisions are made. When a PBM's revenue increases with higher drug costs or retained rebates, utilization decisions may favor high-rebate drugs over the lowest-net-cost option. This creates a potential misalignment between the PBM's incentives and the employer's plan goals.

SmithRx earns revenue through a fixed per-member, per-month (PMPM) administrative fee and passes through 100% of manufacturer rebates. Because its compensation does not increase when medication costs rise, SmithRx's incentives are aligned with the plan's goal of clinically appropriate care at the lowest net cost.

For a broader framework on comparing PBMs, see how to evaluate a pharmacy benefit manager.

Frequently Asked Questions

What prior authorization metrics should an employer ask a PBM for?

Request PA volume, approval and denial rates by drug category, appeal overturn rates, and standard and urgent turnaround times. These metrics should be reported regularly so you can monitor whether the program is performing as expected.

How fast should prior authorization decisions be?

Expect your PBM to define distinct standard and urgent timelines and report actual performance against them. Actual turnaround depends on the drug, the completeness of clinical information submitted, and whether the request is routine or urgent.

Can prior authorization requirements be reduced?

Reduction is possible through approaches such as gold carding for prescribers with strong approval histories, automation through ePA, or removing PA requirements on preferred formulary products. Ask your PBM what options are available and how they would affect your plan.

Evaluating a PBM's prior authorization program comes down to turnaround time, transparency and reporting, a fair appeals process, member communication, and aligned incentives. Employers who assess these criteria systematically can identify a PBM partner that reduces administrative burden, supports employees through the PA process, and keeps utilization decisions focused on clinical appropriateness and cost.

If you're interested in how SmithRx approaches prior authorization and capturing the lowest net cost on medications, speak with one of our PBM experts.