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💊 '''Prescription drug''' in insurance refers to a pharmaceutical product that requires authorization from a licensed healthcare provider before dispensation and that forms a covered benefit category under [[Definition:Health insurance | health insurance]], [[Definition:Workers' compensation insurance | workers' compensation]], and certain [[Definition:Liability insurance | liability]] policies. The handling of prescription drug costs is one of the most financially significant and operationally complex aspects of health-related [[Definition:Insurance policy | insurance programs]], with drug spending representing a major—and growing—share of total [[Definition:Claims | claims]] expenditure for both private carriers and public programs.

⚙️ Coverage typically operates through a [[Definition:Pharmacy benefit manager (PBM) | pharmacy benefit manager]] that maintains a [[Definition:Formulary | formulary]]—a tiered list of approved medications that determines the [[Definition:Copayment | copayment]] or [[Definition:Coinsurance | coinsurance]] level the [[Definition:Policyholder | policyholder]] pays at the pharmacy counter. Generic drugs usually sit on the lowest-cost tier, while specialty biologics can occupy the highest. Insurers negotiate rebates with drug manufacturers, apply [[Definition:Prior authorization | prior authorization]] and step-therapy protocols to manage utilization, and set annual or per-prescription spending caps. In [[Definition:Workers' compensation insurance | workers' compensation]], prescription drug management follows state-specific fee schedules and formulary rules, and carriers increasingly use [[Definition:Prescription drug database | prescription drug monitoring programs]] to flag opioid over-prescribing and potential [[Definition:Insurance fraud | fraud]].

📊 Rising prescription drug costs exert enormous pressure on [[Definition:Loss ratio (L/R) | loss ratios]] and premium affordability across every line that includes drug benefits. The introduction of high-cost gene therapies and specialty biologics—some exceeding six figures per treatment—has forced [[Definition:Actuary | actuaries]] to revisit trend assumptions and [[Definition:Reinsurer | reinsurers]] to reevaluate attachment points on [[Definition:Excess of loss reinsurance | excess-of-loss]] covers. For [[Definition:Insurtech | insurtechs]] operating in the health space, prescription drug analytics powered by real-time claims data offer opportunities to identify cost-saving interventions, improve formulary compliance, and reduce waste. Regulatory developments around drug pricing transparency and importation rules continue to reshape how insurers forecast and manage this critical cost driver.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Pharmacy benefit manager (PBM)]]
* [[Definition:Formulary]]
* [[Definition:Health insurance]]
* [[Definition:Prior authorization]]
* [[Definition:Workers' compensation insurance]]
* [[Definition:Prescription drug database]]
{{Div col end}}

Definition:Prescription drug - Revision history

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