Step Therapy Rules: How Insurance Forces You to Try Generics Before Brand-Name Drugs

Imagine your doctor prescribes a medication that works perfectly for your condition. Then your insurance denies it-unless you try three cheaper drugs first. That’s not a hypothetical. It’s step therapy, a common rule in health insurance plans that forces patients to "fail" on lower-cost medications before getting access to the one their doctor actually recommended.

What Exactly Is Step Therapy?

Step therapy, also called "fail-first," is a cost-control tactic used by insurance companies. It’s built into drug formularies-lists of medications a plan covers-and it follows a strict sequence. You start with the cheapest option, usually a generic drug. If that doesn’t work-or causes side effects-you move to the next step. Only after failing at each level do you get approval for the original, often more expensive, medication.

This isn’t random. Insurers group drugs into tiers. Step one is almost always a generic. Step two might be another generic or an older brand-name drug. Step three is where the expensive specialty meds live-like biologics for rheumatoid arthritis or newer diabetes drugs. You can’t jump to step three without proving the lower steps failed.

According to a 2021 analysis, about 40% of U.S. health plans use step therapy for prescription drugs. That number’s been rising since 2018. It’s especially common in employer-sponsored plans and for chronic conditions like arthritis, asthma, depression, and multiple sclerosis.

Why Do Insurers Use It?

The reason is simple: money. Prescription drug costs have skyrocketed. Brand-name drugs can cost hundreds or even thousands of dollars a month. Generics? Often under $10. Insurers say step therapy helps keep premiums lower by steering patients toward cheaper, clinically proven options.

Studies show step therapy can cut pharmaceutical spending by 5% to 15% in certain drug classes. For insurers, that’s a big win. But here’s the catch: those savings don’t always translate to better health outcomes.

Take rheumatoid arthritis. A 2022 survey by the Arthritis Foundation found that 68% of patients on step therapy experienced negative health effects. Forty-two percent reported their disease got worse while they were stuck trying ineffective generics. One patient on Reddit described spending six months failing three different NSAIDs before getting approval for a biologic. By then, her joint damage was irreversible.

When Step Therapy Goes Wrong

The biggest problem? Time.

Getting approval for a step therapy exception can take 4 to 8 weeks. That’s not just paperwork-it’s lost mobility, worsening pain, or a relapse in mental health. The American College of Rheumatology says this delay can cause permanent harm. And it’s not just chronic conditions. For someone with severe depression, waiting months to switch from an ineffective generic to a better-suited antidepressant can mean the difference between recovery and crisis.

There’s also the issue of restarting the process. If you change jobs or switch insurance plans-even if you’ve been stable on the same medication for years-you might have to go through step therapy all over again. That’s not just frustrating. It’s dangerous.

One patient advocacy group found that 28% of people gave up on treatment entirely because the paperwork was too overwhelming. Another 73% spent 1 to 3 months just trying to get an exception approved.

When Step Therapy Actually Works

It’s not all bad. For some people, the first generic drug works just fine. A 2023 GoodRx survey found that 17% of patients ended up doing better on the insurer-recommended medication than they did on the original prescription. They saved money, avoided side effects, and didn’t need to escalate to pricier options.

And that’s the point insurers make: they’re not trying to deny care. They’re trying to prevent people from taking expensive drugs when cheaper ones are just as effective. In theory, that makes sense. In practice? The system often ignores individual needs.

How to Fight a Step Therapy Denial

You’re not powerless. Most plans have a formal exception process. Here’s how to use it:

1. Ask your doctor to submit a step therapy exception request. This isn’t optional-they have to do it. Don’t wait for them to bring it up.
2. Make sure they include medical evidence: past treatment failures, lab results, side effect history, or proof that the required drug is contraindicated.
3. Get a letter of medical necessity from your provider. This should clearly state why the step therapy drug won’t work for you.
4. Follow up. If you don’t hear back in 72 hours, call your insurer’s appeals line. Ask for a case number and a deadline.
5. Know your state’s rules. Twenty-nine states have laws forcing insurers to grant exceptions under certain conditions.

Under federal guidelines (like the proposed Safe Step Act), insurers must grant exceptions if:

• You’ve already tried and failed the required drug
• It would cause serious harm to wait
• The drug is contraindicated due to allergies or other conditions
• It would stop you from doing basic daily tasks
• You’re already stable on your current drug and it was previously approved

Blue Cross Blue Shield of Michigan, for example, promises to review urgent requests in 24 hours and standard ones in 72 business hours. But that’s not universal. Some insurers drag their feet for weeks.

What You Can Do Right Now

If you’re on step therapy:

• Keep a log of every medication you try-dosage, side effects, how long you took it, and whether it helped.
• Ask your pharmacist if your drug is subject to step therapy. They often know the formulary rules before you do.
• Check if your drug manufacturer offers a patient assistance program. Many pharmaceutical companies provide free or discounted meds to bypass insurance barriers.
• If you’re switching plans, ask your new insurer if they’ll honor your current medication. Some will, if you provide documentation.

And if your doctor refuses to fight for you? Find another one. Not all providers are willing to push back on insurers. But many are-and they’re the ones who’ll make sure you get the care you need, not the one that’s cheapest for the company.

The Big Picture: State vs. Federal Rules

Here’s the messy part: not all insurance plans are subject to the same rules.

State laws that protect patients from step therapy delays only apply to fully-insured plans. That’s about 39% of Americans. The other 61%? They’re covered by self-insured employer plans-run directly by the company, not an insurer. Those are regulated by the federal government under ERISA, and they’re not required to follow state step therapy laws.

That’s why the Safe Step Act matters. Introduced in 2017 and reintroduced multiple times since, this federal bill would force self-insured plans to offer the same exception rights as state-regulated plans. Without it, millions remain unprotected.

Meanwhile, 14 more states are pushing new laws in 2025 to tighten timelines, expand exception criteria, and require insurers to respond faster. But until federal law catches up, your rights depend on where you live and how you get your insurance.

What’s Next?

Industry analysts predict step therapy will cover 55% of specialty drug prescriptions by 2025. That means more people will face these hurdles. The trend isn’t slowing-it’s accelerating.

But so is the pushback. Patient groups are demanding faster appeals, clearer rules, and automatic exceptions for conditions that can’t wait. Some insurers are starting to respond. A few now offer pre-approval pathways for patients with documented treatment history.

For now, the system is broken. It saves money, but at a real human cost. The best defense? Know your rights. Document everything. Push back. And don’t accept "no" as the final answer.