If I am in the 2017 Donut Hole and get a 60% discount on my brand-name drugs, what percent of my purchase counts toward exiting the Donut Hole?

90% of your brand-name drug's retail cost is counted toward exiting the 2017 Donut Hole.

If your monthly purchases of formulary medications consistently have a retail value of over $309, you will exceed your Medicare Part D prescription drug plan's Initial Coverage Limit ($3,700 in 2017) and enter the Donut Hole portion of your Medicare plan. Once you reach the Donut Hole or Coverage Gap, you will receive a discount on the retail prices of your brand-name and generic drug purchases.

So in 2017, once you reach the Donut Hole, your brand-name drug purchases will receive a 60% Donut Hole discount (you will pay 40% of retail) and 90% of the brand-name drug price will count toward meeting your true out-of-pocket threshold (TrOOP) or Donut Hole exit point of $4,950.

In general, with the brand-name Donut Hole discount, you will receive credit for the 50% brand-name drug manufacturer discount plus the portion of the prescription drug’s retail price you paid (40% in 2017) - but, you do not get credit toward TrOOP for the portion of the drug cost paid by your Medicare plan (10% in 2017).

So if you buy a brand-name medication with a $100 retail cost while in the 2017 Donut Hole, you pay $40 and get $90 credit toward exiting the Donut Hole or meeting the $4,950 out-of-pocket threshold.

Again, the additional 10% of the “discount” is paid by your Medicare Part D plan and therefore does NOT count toward exiting the Donut Hole or reaching your out-of-pocket costs (TrOOP).

In 2017, generic drug purchases receive a 49% Donut Hole discount (you pay 51% of retail) and your discounted generic drug cost counts toward meeting your 2017 true out-of-pocket threshold (TrOOP or total drug spend) of $4,950. So if you purchase a generic medication with a retail value of $100 while in the 2017 Donut Hole, you will receive a 49% discount and pay $51. The $51 will then count toward meeting your 2017 TrOOP threshold of $4,950.

Keep in mind that brand-name drug purchases actually get a larger discount and more of the drug's retail cost counts toward meeting your TrOOP - so it is possible that a brand-name medication may cost your less than a generic alternative - assuming that your Medicare Part D plan covers both the brand-name and the generic equivalent.

Please note, if the retail value of your monthly formulary medication purchases is consistently over $672, you will most likely exceed your Medicare Part D prescription drug plan's total out-of-pocket spending limit (TrOOP) ($4,950 in 2017) and enter the Catastrophic Coverage portion of your 2017 Medicare plan, where you will pay around 5% of the retail drug price for the remainder of the year.

You can read more about the Donut Hole Discount in our FAQs or in our on this site articles.