What Kind of Discount Can We Expect in the Medicare Part D Donut Hole or Coverage Gap?

Question:

What kind of discount can we expect in the Medicare Part D Donut Hole or Coverage Gap?

Answer:

Starting back in the 2011 Medicare Part D plan year, a discount or co-insurance (cost-sharing) was introduced to reduce the cost of generic and brand-name prescription drugs purchased by non-LIS Medicare beneficiaries once they entered the Coverage Gap (or Donut Hole / Doughnut Hole) portion of their Medicare Part D prescription drug plan (or Medicare Advantage plan that included prescription drug coverage).

If you reach the Donut Hole phase of your Medicare prescription drug plan andyour medication is on your plan’s formulary andyou are not receiving financial Extra Help (Low Income Subsidy):

In 2019, you will receive a 70% discount on brand-name drugs and a 63% discount on generic drugs. (You will pay 25% of your plan’s negotiated retail cost for brand-name prescriptions and 37% of the retail cost for generics.)
As a reminder, in 2018, you received a 65% discount on brand-name drugs and a 56% discount on generic drugs. (You paid 35% of your plan’s negotiated retail cost for brand-name prescriptions and 44% of the retail cost for generics.)

See the charts below for Donut Hole discounts 2011 to 2020.

Please note:The Donut Hole discount is not available to anyone receiving financial Extra Help (the Low-Income Subsidy). Also, the Donut Hole discount is only for Medicare Part D drugs included on your Medicare prescription drug plan’s formulary or drug list.

The generic drug discountwill 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:

Generic Drug Discount
Plan Year	Beneficiary Cost-Sharing	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 and beyond	25%	75%

The brand-name drug discountoperates differently from the generic drug discount – but the brand-name drug discount will also be reduced to co-insurance of 25% in 2019.

Brand-Name Drug Discount
Plan Year	Beneficiary Cost-Sharing	Plan Cost-Sharing	Manufacturer Cost-Sharing
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%
2020 and beyond	25%	5%	70%

* President Trump signed the Bipartisan Budget Act of 2018 on Friday, Feb. 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 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 plusthe 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).

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