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What kind of drug discount can we expect in the Doughnut Hole?

Category: Donut Hole Discounts
Published on 2012-08-10 14:04:32

Starting back in 2011, the co-insurance (or cost-sharing) of generic and brand-name medications purchased while in the Coverage Gap (or Donut Hole / Doughnut Hole) was reduced or "discounted" for non-Low-Income Subsidy (non-LIS) Medicare beneficiaries.

The medications must be drugs covered under the Medicare Part D program and included on your Medicare Part D plan’s formulary or drug list.  The discount for Donut Hole drug purchases can change each year until 2020 when all medications purchased in the Donut Hole will cost 25% of the negotiated retail cost - and the Donut Hole will be considered "closed".  For instance,

In 2018, you receive a 65% discount on Brand-name drugs (you pay 35%) - and get 85% of the total retail cost credited toward meeting your total out-of-pocket limit (TrOOP) or Donut Hole exit point.  Plus, you will receive a 56% discount on Generic drugs (you pay 44% of the retail cost) and the discounted amount you actually pay will also count toward TrOOP.

Please see the charts below for future discounts on generic and brand-name drugs purchased in the Donut Hole.

Again, please note, that the Doughnut Hole discount is not available to anyone receiving financial Extra Help (the Low-Income Subsidy).   Also the discount is only for Medicare Part D drugs included on your Medicare Part D prescription drug plan formulary.

Generic Drugs:  The Generic drug discount will increase each year until the plan year 2020 when the co-insurance for generics in the Coverage Gap will be 25%.  The following table shows how the annual Generic drug discount increases:
Plan Year Beneficiary Cost-Sharing
(you pay)
Medicare Part D
plan Cost-Sharing
2011 93% 7%
2012 86% 14%
2013 79% 21%
2014 72% 28%
2015 65% 35%
2016 58% 42%
2017 51% 49%
2018 44% 56%
2019 37% 63%
2020 25% 75%
Brand-Name Drugs: The Brand-Name drug discount operates differently from the Generic drug discount - but the Brand-Name drug discount will also be reduced to co-insurance of 25% by 2019 (instead of 2020).

Update 02/12/18: President Trump signed the Bipartisan Budget Act of 2018 (Pub.L. 115-123) on Friday, February 9, 2018 that effectively "closes" the Coverage Gap for brand-name drugs, with the brand-name Donut Hole discount increasing to 75% in 2019.

A key feature to the new law is that, starting in 2019, the pharmaceutical industry will be responsible for 70% of the cost of medications in the Coverage Gap, therefore you will receive credit for 95% of the retail drug cost toward meeting your 2019 total out-of-pocket maximum or Donut Hole exit point (the 25% of retail costs you pay plus the 70% drug manufacturer discount).

As a note, since the brand-name drug manufacturer will take on an additional 20% of the retail cost, the Medicare Part D plan's responsibility will decrease to 5% (from the originally planned 20% in 2019 and 25% in 2020 and beyond), the Medicare beneficiaries portion will decrease to 25% (from the original planned 30% in 2019).

Plan Year Beneficiary Cost-Sharing
(you pay)
Medicare Part D
plan Cost-Sharing
Drug Manufacturer
2011 50% 0% 50%
2012 50% 0% 50%
2013 47.5% 2.5% 50%
2014 47.5% 2.5% 50%
2015 45% 5% 50%
2016 45% 5% 50%
2017 40% 10% 50%
2018 35% 15% 50%
2019 25% 5% 70%

and beyond

25% 5% 70%

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