Step Therapy Reform: Evolving Regulations & Implications for Payers

Lisa Edwards, PharmD | Senior Director, Access Experience Team

Primary concerns include delayed initiation of treatment, the risk of disease progression, and increased administrative burden. These are issues that can contribute to higher downstream costs for both patients and payers, overshadowing any short-term savings. Many payers are facing state-specific step therapy reform legislation that will influence how they think about and operationalize their utilization management strategies.

State-Level Reform: Fundamentally Reshaping Payer Strategies

State regulation of step therapy continues to evolve and expand, with more than two-thirds of U.S. states taking action to implement or propose legislation that places guardrails on step therapy, primarily within Commercial group health and fully insured markets, and to a lesser degree in state Medicaid plans. Some state Commercial market reforms commonly allow patients and or providers to bypass step therapy under defined clinical circumstances. Other requirements are specific to certain disease states, such as oncology and mental health, or focus on components ensuring patients who are stable on their current treatment are allowed to continue.

The operational flow of the step therapy program exception process has also been scrutinized and targeted by these legislative reforms. At the U.S. Congressional level, S.2903 - Safe Step Act has been introduced, which will amend the Employee Retirement Income Security Act (ERISA) of 1974, standardize step therapy exception processes used by group health plans, and expedite patient access to appropriate medications. 

Several states already have very detailed restrictions. For example, Connecticut prohibits insurers from requiring a greater than 30-day trial of any pre-requisite drug, trial of a ‘step 1’ drug prior to any stage IV metastatic cancer medication, or before specific mental health conditions under certain circumstances. 

The state of Illinois took a more restrictive approach by banning the use of step therapy entirely beginning Jan. 1, 2026, with limited exceptions for some state-operated Medicaid programs for drugs that are not included on their Preferred Drug List. Payers in other states will be closely watching the health economic impacts of this.

Within the Medicaid market, step therapy protections remain fragmented as the reform has not been as widely adopted, given the individual state’s budgetary, financial, and operational constraints. Some states are adopting alternative measures, such as mandating transparency in clinical review criteria and the publication of step-therapy exception requests, approvals, and denials on the plan’s website.

Implications for Market Access

Ongoing variation exists across states’ step therapy requirements, oversight mechanisms, timelines, and exception processes. This will ultimately influence and, in some cases, dictate individual, small/large group, and fully-insured employer plans’ utilization management strategies. 

Key Future Trends Among Payers May Include: 

• Criteria based on standardization of clinical evidence, streamlining payer decisions, reducing administrative burden through workflow optimization, and integration of regulatory-compliant AI tools as appropriate.

• Increased adoption of real-world evidence to evaluate comparative effectiveness versus prerequisite therapies.

• Greater transparency in decision-making and exception pathways, reducing time from prescription to therapy initiation.

• Potential reduction in the use of step therapy programs due to an increase in administrative compliance load for payers.

Strategic Considerations for Market Access

Standardization of criteria and/or elimination of step therapy programs can impact contracting strategies typically used in the competitor market basket. While it is not likely that step therapy will be eliminated entirely, there are some key areas that should be considered from a market access perspective to align with the regulatory trends:

• Enhancement of real-world evidence packages that clearly demonstrate improvements in disease control relative to competitor pre-requisite treatments.

• Development of economic models that align with payer goals, highlighting downstream benefits such as improved patient adherence, reduced resource utilization (i.e., MD office visits, laboratory testing, monitoring), and fewer hospitalizations as applicable.

• Strengthened provider-focused exception-pathway support tools to minimize administrative burdens and accelerate therapy access.

• Monitoring state-level policy changes that can uncover new access opportunities and inform payer engagement strategies.

• Flexibility in contracting, given payer limitations on the use of step therapy across competitor products.

Precision AQ’s team of experts is well-positioned to support organizations in navigating this evolving regulatory environment and identifying opportunities to maximize payer strategy and patient access. Book a call with our team today.