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Do normal retail drug costs or the the drug costs in my Explanation of Benefits count toward my Medicare Part D plan's Donut Hole?

Category: Entering the Donut Hole
Updated: Jul, 23 2023


The retail cost in your Explanation of Benefits letter.  Your Medicare Part D plan's negotiated retail prescription drug prices can be (and usually are) different than the retail prices that your pharmacy normally charges.

Your Medicare Part D plan's negotiated retail drug prices are what you see in your monthly Explanation of Benefits (or EOB) letter - and these prices are used to determine when your enter your plan's Donut Hole or Coverage Gap.  You should be able to find this information in Section 1 of your Explanation of Benefits or EOB letter (this EOB section details your purchases for the prior month.  It breaks each purchase into what your Medicare Part D plan paid, what you paid, and what others have paid on your behalf (like the Donut Hole discount), and who made the payment).

Reminder about your drug plan's Initial Coverage Limit
Remember that you enter your Medicare Part D plan's Coverage Gap or Donut Hole when the retail value of your formulary drug purchases exceeds your plan's Initial Coverage Limit.  The Initial Coverage Limit can (and usually does) change every year.  Once you enter the Donut Hole phase, you will receive the Donut Hole discount (and maybe even some additional plan coverage).

Example Question

I take a drug that has a retail cost of $49.99 for a 30-day supply at my pharmacy.  But on my monthly Explanation of Benefits statement, my Medicare Part D plan paid $7.93 and I paid my $5 co-pay, which would infer that I have only earned $12.93 toward the Donut Hole. 
So, which number is correct - the $49.99 pharmacy drug price or the $12.93 Explanation of Benefits price that I calculated when counting toward the Donut Hole?

The $12.93 is correct. Your Medicare Part D plan's negotiated retail price for your Part D formulary medication counts toward the Donut Hole.  In your example, this would be the $12.93 and not the $49.99 normal retail drug price.

Please note that when you estimate your Donut Hole exposure, many of the online tools are using either the public retail price or an average retail price per plan services area instead of the plan's negotiated retail price because the true negotiated price can be different for each pharmacy and prescription drug plan combination.

Read more at EOB Section 1: Your prescriptions during the past month.





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