BACKGROUND Respiratory syncytial virus (RSV) is the leading cause of upper and lower respiratory tract infections in infants and young children. Most children are exposed to the virus before they are 2 years old and experience such symptoms as cough, fever, and irritability. In a select population of infants, the virus can cause hypoxemia and hospitalization. To avoid hospitalization, good infection control practices should be employed, and for those infants at high risk, prophylaxis with palivizumab is indicated. Palivizumab has been shown to reduce hospitalization rates in high-risk infants by 50%. Because of the high cost of palivizumab, it is prudent to use this medication in the population in which it will be most effective. The American Academy of Pediatrics (AAP) established the criteria for those infants who would benefit the most from palivizumab prophylaxis, and these criteria were the foundation for a prior authorization (PA) program to determine coverage of palivizumab in a health plan of approximately 500,000 members. OBJECTIVE To (a) analyze the appropriateness of this PA program for palivizumab used prophylactically for RSV, and (b) determine the financial cost associated with the medication and disease for this health plan. METHODS A 3-year, retrospective study was conducted from the 2005- 2006 RSV season through the 2007-2008 season. The primary endpoint outcome was the hospitalization rate associated with RSV infection. Secondary endpoints included the cost of palivizumab and RSV-related emergency room (ER) utilization. Infants were placed into 2 groups: those who received PA approval for use of palivizumab and those who were denied coverage in the PA process. Disease-related hospitalization and ER visits were identified by at least 1 administrative claim containing either a primary or secondary ICD-9-CM code for any of the following: RSV (079.6), acute bronchiolitis caused by RSV (466.11), or pneumonia caused by RSV (480.1). Drug cost was defined as the health plan's allowed amount, which is based on a predefined fee schedule for the Current Procedural Terminology (CPT) code 90378 for palivizumab. Hospital and ER costs are the health plan allowed amounts (health plan plus member cost) based on the reimbursement rates determined by diagnosis related group (DRG) and other coding, and the plan-allowed amount based on DRGs includes all services and drugs provided in the specific encounter. Drug cost avoided was calculated as the average cost of palivizumab treatment per episode multiplied by the number of infants denied coverage of palivizumab over the 3-year study period. RESULTS Over 3 RSV seasons through May 2008, the PA program received 1,090 requests for coverage of palivizumab, of which 348 (31.9%) were denied. Of 742 PA-approved infants, 629 received at least 1 dose of palivizumab. The mean (SD) gestational age of the PA-denied group was 34.4 (2.5) weeks versus 32.5 (4.0) weeks for the PA-approved group (P < 0.001). In the PA-denied group, 14 infants (4.0%) were subsequently hospitalized with an RSV infection, and 5 (1.4%) had an RSV-related ER visit versus 40 (6.4%) hospitalized and 14 (2.2%) with ER visits for infants in the PA-approved group (P = 0.055 and P = 0.019, respectively); 15 (4.3%) of the PA-denied group had either a hospitalization or an ER visit versus 42 (6.6%) in the PA-approved group (P = 0.060). One patient in the palivizumab PA-approved group died. Over the 3 RSV seasons, the mean number of palivizumab doses and mean allowed palivizumab cost per treatment episode (per infant per season) were 3.64 and $6,950, respectively, and the average allowed palivizumab cost was $7,702 per utilizing infant. Total per infant costs for palivizumab, RSV hospitalizations, and RSV-related ER visits were $8,534 for infants receiving palivizumab compared with $223 for those denied palivizumab coverage (P = 0.002). Drug cost avoidance associated with the PA program was estimated to be $2,418,600 (348 infants times $6,950 palivizumab cost per episode) over the 3 RSV seasons. CONCLUSION In a 500,000-member health plan, a PA program to restrict palivizumab use in accordance with AAP recommendations was associated with estimated palivizumab drug cost avoidance of more than $2.4 million over 3 years. There was no significant difference in the RSV-related hospitalization rate for the PA-denied versus the PA-approved groups, but the PA-denied group had a slightly lower rate of RSV-related ER visits.