While in the Donut Hole, you will receive the 2016 Donut Hole discount of 55% for all brand-name drug purchases (you pay 45% of the retail cost and get 95% credit toward exiting the Donut Hole or meeting TrOOP) and a generic drug discount of 42% (you pay 58% of the retail cost and the 58% you pay goes toward exiting the Donut Hole or meeting TrOOP).
What you pay in the Donut Hole and whether you enter the Catastrophic Coverage phase.
So, if you are already in the 2016 Donut Hole by May 2016 - and your retail drug costs are consistently over $700, you will probably reach the Catastrophic Coverage portion of your Medicare Part D plan (before November) and pay about 5% of the retail cost for brand and generic drugs for the remainder of the year (specifically, you will pay the higher of $7.40 for brand drugs, $2.95 for generics, or 5% of the retail drug price).
Again: while in the 2016 Catastrophic Coverage phase, instead of your Donut Hole discount, you will receive about a 95% discount (or pay $7.40 for brand drugs or $2.95 for generics, whichever is higher).
Bottom Line: If you are already in the Donut Hole by mid-May 2016, you should consider not only what you will pay in the Donut Hole, but also how quickly you will exit the Donut Hole.
Example: Expensive Brand and Not-so-Less-Expensive Generic
If you normally use an expensive brand medication such as Aggrenox® that has a retail price of around $465 (depending on your plan and chosen pharmacy), you might think of considering the newly introduced generic Asprin-Dipyridam ER 25-200 MG that is now available on some Medicare drug plan formularies. The cost of this generic is around $350.
As reference, here is a table showing the availability of this new generic on 2016 Medicare Part D prescription drug plans (PDPs) and Medicare Advantage plans that include prescription drug coverage (MAPD)
|
Generic Drug Equivalent [and Brand-name Drug] |
PDP |
MAPD |
|
ASPIRIN-DIPYRIDAM ER 25-200 MG
[Aggrenox] |
||
|
|
|
And the following chart shows you the potential cost in the 2016 Donut Hole and beyond.
|
Drug (brand and generic) |
Approx. retail cost |
Donut Hole Discount |
Your cost in the Donut Hole |
TrOOP impact (exiting the Donut Hole) |
Catastrophic Coverage Cost |
|
$465 |
55% |
$209 ($465 x.45) |
$442 |
$23 |
|
|
$350 |
42% |
$203 ($350 x.58) |
$203 |
$18 |
* The approximate retail prices can vary with each Medicare drug plan (PDP or MAPD) and pharmacy and change throughout the year and do not include dispensing fees.
Please notice: In this particular example, you will pay only slightly more ($6) for the brand-name drug while in the Donut Hole – plus, since 95% of the brand-name retail cost is applied to exiting the Donut Hole (TrOOP is $4,850 in 2016), you will actually exit the Donut Hole slightly faster using the brand-name medication over the generic.But! You need to look carefully at the retail cost of your current brand-name drugs and compare them to your plan’s negotiated retail cost for the generic equivalents. You can contact your plan’s Member Services department for assistance with this comparison (the toll-free number is on your Member ID) or telephone Medicare at 1-800-633-4227 and ask a Medicare representative for assistance.
Here is a more specific example using the Florida United American - Select (PDP)
|
Drug (brand and generic) |
Approx. retail cost |
Donut Hole Discount |
Your cost in the Donut Hole |
TrOOP impact (exiting the Donut Hole) |
Catastrophic Coverage Cost |
|
$476.46 |
55% |
$214.40 |
$452.64 |
$23.82 |
|
|
$366.09 |
42% |
$212.33 |
$212.33 |
$18.30 |
Here is yet another specific example with a larger gap between costs using the Florida Express Scripts Medicare - Choice (PDP)
|
Drug (brand and generic) |
Approx. retail cost |
Donut Hole Discount |
Your cost in the Donut Hole |
TrOOP impact (exiting the Donut Hole) |
Catastrophic Coverage Cost |
|
$472.13 |
55% |
$212.46 |
$448.52 |
$23.61 |
|
|
$298.61 |
42% |
$173.19 |
$173.19 |
$14.93 |
Bottom Line: Switching to a generic drug may not always prove to be more cost-effective than using a brand-name drug. Check the negotiated retail prices of brands and generics with Medicare drug plan and with your pharmacy.
And remember: Retails drug prices (for generic or brands) can change at any time throughout the plan year. Sometimes retail drug costs will increase only a few dollars throughout the year, sometimes decrease a few dollars, and other times, drug prices can increase substantially over the course of a year.
Medicare Advantage plans that include some form of Donut Hole Coverage: It is possible that you Medicare Advantage plan (MAPD) will include Donut Hole coverage for some of the formulary drugs. The Donut Hole discount is actually applied to your discounted prices and so your calculations will vary from those above. Please be sure to contact your plan for more information or review your monthly Explanation of Benefits letter.
A note on using a Drug Discount Program if you have reached the Donut Hole by mid-May.
In our FAQ "Am I allowed to use a Drug Discount Program instead of my Medicare Part D plan?" ( on this site) we note that you are not required to use your Medicare Part D prescription drug plan when purchasing medications and can instead use a pharmacy's Drug Discount Program if you find the discounted prices more economical.
However, if you use a Drug Discount Program instead of your Medicare Part D plan, your drug costs will not count toward your out-of-pocket limit (TrOOP) - and not help you exit the Donut Hole. Again, if you enter the Donut Hole mid-May, you probably will enter the Catastrophic Coverage phase before November and receive around a 95% discount on your drug purchases for the remainder of the year.
Bottom Line: Consider whether the savings using a Discount Program for the remainder of the year will be more beneficial than the Donut Hole discount and several months of a 95% Catastrophic Coverage discount.
(Special thanks to Mr. T. Coleman for suggesting this article.)