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If I am already in the 2018 Donut Hole by May, is it cheaper to use a brand-name drug or the generic equivalent?

Category: The Donut Hole or Coverage Gap
Published on 2018-05-27 13:33:27


It depends. If you currently use Medicare Part D drugs with a retail cost of over $750 per month, you may be in the 2018 Donut Hole or Coverage Gap by mid- to late-May.

While in the Donut Hole, you will receive the 2018 Donut Hole discount of 65% for all brand-name drug purchases (you pay 35% of the retail cost and get 85% credit toward exiting the Donut Hole or meeting TrOOP) and a generic drug discount of 56% (you pay 44% of the retail cost and the 44% 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 2018 Donut Hole by the end of May 2018 - and your retail drug costs are consistently over $800, you will probably reach the Catastrophic Coverage portion of your Medicare Part D plan (in 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 5% of the retail drug price or $3.35 for generics and preferred multi-source drugs, and the higher of 5% of the retail drug price or $8.35 for all other drugs.

Again: while in the 2018 Catastrophic Coverage phase, instead of your Donut Hole discount, beneficiaries will be charged $3.35 for those generic or preferred multi-source drugs with a retail price under $67 and 5% for those with a retail price greater than $67. For all other drugs, beneficiaries would pay $8.35 for those drugs with a retail price under $167 and 5% for those with a retail price over $167.
Bottom Line: If you are already in the Donut Hole by mid-May 2018, 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-name medication such as Kaletra® that has a retail price of around $540 (depending on your plan and chosen pharmacy), you might think of considering the generic Lopinavir-Ritonavir 80-20mg/ml.  As with many other relatively new generic equivalents, Lopinavir-Ritonavir is often on the same formulary drug tier as Kaletra® and has a negotiated retail price that is similar to the brand-name.  This negotiated retail price will typically come down over time.

The following chart shows you the potential cost in the 2018 Donut Hole and beyond. For this example we will use the Florida, Aetna Medicare Rx Select (PDP) for our pricing.
 

Brand-Name Drug vs. Similarly Price Generic Equivalent

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

Kaletra 80/20 Oral Solution®

$538.97

65%

$188.64(538.97 x .35)

$458.12

$26.95

Lopinavir-Ritonavir 80-20MG/ML

$435.43

56%

$191.59 ($435.43 x .44)

$243.84

$21.77

Brand vs. Generic
$103.54 9% -$2.95 $214.28 $5.18

* 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.

In this particular example, you will actually pay $3 less for the brand-name drug while in the Donut HoleAND, since 85% of the brand-name retail cost is applied to exiting the Donut Hole (TrOOP is $5,000 in 2018), you will exit the Donut Hole slightly faster using the brand-name medication over the generic.

Important: 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. The closer the negotiated retail cost of the generic is to the brand-name drug, the more benefit you will see from the additional credit for exiting the Donut Hole. AND you may actually pay less for the brand in the Donut Hole due to the additional 50% brand-name drug manufacturer's discount. 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.

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 generics 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?" (https://Q1FAQ.com/603.html) 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.






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