OBJECTIVES: The introduction of novel therapeutic options for psoriasis has raised managed care's interest in controlling costs associated with dermatological treatments. Prior authorization (PA) can be a successful way of managing costs. However, experience with topical treatments for acne suggests that PA may not be cost-effective. The role of managed care in dermatology and the potential impact of PA requirements for novel topical therapies for psoriasis are considered. METHODS: Using a model based on recent nationally representative survey data (NAMCS), total annual cost estimates for a managed care organization to cover psoriasis treatment with a topical agent with or without PA requirements were calculated and compared. Costs for treatment and administrative costs associated with PA processes were included. The model assumed 68,000 insured patients required treatment (with an additional 1% to account for abuse/misuse), an average wholesale price of $100 per prescription (each prescription filled 4x/year), and a cost of $20 to process each PA request. RESULTS: The total annual costs were $28,573,600 when PA was required and $27,472,000 when PA was not required. Thus there was a total annual loss to the managed care organization of $1,101,600 associated with PA requirements. CONCLUSION: Requiring PA for novel topical treatments for psoriasis, such as the new 2-compound product containing calcipotriene and betamethasone dipropionate, is not likely to be cost-effective for a managed care organization.