MEDICARE PRESCRIPTION DRUG COVERAGE

Closing the Coverage Gap— 

Medicare Prescription Drugs Are 

Becoming More Affordable The Affordable Care Act includes benefits to make your Medicare 

prescription drug coverage (Part D) more affordable. When you’re in 

the coverage gap (also called the “donut hole”) in your 

Medicare prescription drug coverage, you’ll get these:

•	 A discount on covered brand-name drugs when you 

buy them at a pharmacy or order them through the 

mail. 

•	 Some coverage for generic and brand-name drugs. 

•	 Additional savings on your generic and brand-name 

drugs during the coverage gap over the next several 

years until it’s closed in 2020. 

The coverage gap closes by maintaining the 50% 

discount the manufacturers offer and increasing what 

Medicare drug plans cover. 

What’s the coverage gap, and how will I know if I’ve reached it? 

Some Medicare drug plans have a coverage gap. This means that after you 

and your drug plan have spent a certain amount of money for covered 

drugs, you may have to pay more for your prescription drugs up to a 

certain limit.

Each month that you fill a prescription, your drug plan mails you an 

“Explanation of Benefits” (EOB) notice, which tells you how much 

you’ve spent on covered drugs and if you’ve reached the coverage gap.
CLOSING THE COVERAGE GAP

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Who can get the savings while in the coverage gap? 

You can get the savings if all of these are true:

•	 You’re currently enrolled in a Medicare Prescription Drug Plan (including 

employer group health and waiver plans) or a Medicare Advantage Plan (like 

an HMO or PPO) that includes prescription drug coverage.

•	 You don’t get Extra Help (a Medicare program that helps people with limited 

income and resources pay Medicare prescription drug costs).

•	 You’ve reached the coverage gap.

How does the coverage gap discount work for brand-name drugs? 

Companies that make brand-name prescription drugs must sign agreements 

with Medicare to participate in the Medicare Coverage Gap Discount Program. 

This program requires the companies to offer discounts on brand-name drugs to 

people who’ve reached the coverage gap. These discounts, along with increased 

coverage in the coverage gap, mean that once you reach the coverage gap in 2015, 

you’ll pay 45% of the plan’s cost for covered brand-name prescription drugs. 

You get these savings if you buy your prescriptions at a pharmacy or order them 

through the mail. The discount will come off of the price that your plan has set 

with the pharmacy for that specific drug. 

Although, you’ll only pay a certain percentage of the price for the brand-name 

drug, the entire price (including the discount the drug company pays) will count 

toward the amount you need to qualify for catastrophic coverage. Once you reach 

catastrophic coverage, you only pay a small coinsurance or copayment for the rest 

of the year. Your “Explanation of Benefits” (EOB) notice will show any discounts 

the drug companies paid. 

Example: Mrs. Anderson reaches the coverage gap in her Medicare drug plan. 

She goes to her pharmacy to fill a prescription for a covered brand-name drug. 

The price for the drug is $60, and there’s a $2 dispensing fee that gets added to 

the cost. Mrs. Anderson will pay 45% of the plan’s cost for the drug 

($60 x .45 = $27) plus 45% of the cost of the dispensing fee ($2 x .45 = $0.90), or 

a total of $27.90, for her prescription. $57.90 will be counted as out-of-pocket 

spending and will help Mrs. Anderson get out of the coverage gap because both 

the amount that Mrs. Anderson pays ($27.90) plus the manufacturer discount 

payment ($30.00) count as out-of-pocket spending. The remaining $4.10, which 

is 5% of the drug cost and 55% of the dispensing fee paid by the drug plan, isn’t 

counted toward Mrs. Anderson’s out-of-pocket spending. 
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Once I’ve entered the coverage gap, will all Medicare-covered 

brand-name prescription drugs be discounted? 

If a drug company has signed an agreement to participate in the Discount 

Program, all of the covered Part D brand-name drugs they make are covered 

during the coverage gap for that calendar year. This includes prescription drugs 

on the plan’s formulary (list of covered drugs) and those covered through an 

appeal. Manufacturers that make more than 99% of the brand-name drugs used 

by people with Medicare participate in this program.

How is coverage for generic drugs changing in the coverage gap? 

In 2015, Medicare will pay 35% of the price for generic drugs during the coverage 

gap. You’ll pay the remaining 65% of that price. What you pay for generic drugs 

during the coverage gap will decrease each year until it reaches 25% in 2020. The 

coverage for generic drugs works differently from the discount for brand-name 

drugs. For generic drugs, only the amount you pay will count toward getting you 

out of the coverage gap. 

Example: Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes 

to his pharmacy to fill a prescription for a covered generic drug. The price for 

the drug is $20, and there’s a $2 dispensing fee that gets added to the cost. Mr. 

Evans will pay 65% of the plan’s cost for the drug and dispensing fee ($22 x .65 = 

$14.30). The $14.30 amount he pays will be counted as out-of-pocket spending to 

help him get out of the coverage gap.

What if I don’t get a discount, but I think I should? 

If you think that you’ve reached the coverage gap and you don’t get a discount 

when you pay for your brand-name prescription, you should review your 

next “Explanation of Benefits” (EOB) notice. If the discount doesn’t appear 

on the EOB, you should work with your drug plan to make sure that your 

prescription records are correct and up-to-date. If your drug plan doesn’t agree 

that you’re owed a discount, you can appeal. You can get help filing an appeal 

from your State Health Insurance Assistance Program (SHIP) or by calling 

1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. 

Visit Medicare.gov/contacts, call 1-800-MEDICARE, or look at the back cover 

of your “Medicare & You” handbook to get the phone number for your local 

SHIP. 
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What if I have other health coverage? 

If your other coverage pays second, it will pay after you get the discount.

What if I have coverage from a State Pharmacy Assistance 

Program (SPAP)? 

If you’re enrolled in a State Pharmacy Assistance Program (SPAP), or any other 

program that gives coverage for Part D drugs (other than Extra Help), you still 

get the discount on covered brand-name drugs. The discount is applied to the 

price of the drug before any SPAP or other coverage. 

I already get discounts from the company that makes my drugs. 

How will this new program affect these discounts? 

Some drug companies offer patient assistant programs, which are different from 

the Medicare Coverage Gap Discount Program. You can check with the drug 

company to find out if its assistance program will change.

Will I get more savings once I reach the coverage gap if I have a 

Medicare drug plan that already includes coverage in the gap? 

Yes. You may get a discount after your plan’s coverage has been applied to 

the price of the drug. The discount for brand-name drugs will apply to the 

remaining amount that you owe. For example, if you’re in a drug plan that offers 

60% coverage on brand-name drugs in the coverage gap and you fill a $100 

brand-name prescription, the cost of your prescription after your plan’s savings 

is $40. The 50% manufacturer discount would get applied to the $40 amount 

so that you only pay $20. The entire $40 paid by you and the manufacturer will 

count as out-of-pocket spending and help you get out of the coverage gap.

 
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I already get Extra Help from Medicare to help pay my 

prescription drug costs. Can I get the discounts too? 

No. If you get Extra Help, you already get coverage for your prescription drug 

costs during the coverage gap. 

What happens if I fill a prescription and only part of the amount is 

in the coverage gap? 

The discount will apply only to the portion of your claim that’s in the coverage 

gap. For example, if you fill a brand-name prescription prescription that 

costs $100, and only $50 of that cost is in the coverage gap, the discount and 

increased coverage will only apply to that $50. In this case, you would pay 

your normal copayment on the $50 portion of the prescription that’s not in the 

coverage gap, plus $22.50 (45% of the $50 portion that’s in the coverage gap). 

How will I know if my prescription will be covered at a discount, 

and what should I do if it isn’t? 

Contact your drug plan or ask your pharmacist if the prescription drugs you 

take are covered at a discount during the coverage gap. Your brand-name drug 

will be covered under Part D, and it’ll be discounted if it’s made by a drug 

company that’s participating in the Medicare Coverage Gap Discount Program 

and you reach the coverage gap. If your brand-name drug is made by a drug 

company that has chosen not to participate in the Discount Program, the drug 

won’t be covered under Part D at all. If your drug isn’t covered, talk to your 

doctor or other health care provider to find out if there’s another drug that you 

can take.

 

 
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What additional discounts and savings will I have over time in the 

coverage gap? 

Over the next several years, you pay less in the coverage gap until it’s closed by 2020. 

By 2020, you’ll pay only 25% for covered brand-name and generic drugs during the 

gap—the same percentage you pay from the time you meet the deductible (if your plan 

has one) until you reach the out-of-pocket spending limit (up to $4,700 in 2015). 

You’ll pay this percentage 

for brand-name drugs in 

the coverage gap

You’ll pay this percentage 

for generic drugs in the 

coverage gap

2015 45% 65%

2016 45% 58%

2017 40% 51%

2018 35% 44%

2019 30% 37%

2020 25% 25%
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Get your questions answered 

•	 Visit Medicare.gov, or call 1-800-MEDICARE (1-800-633-4227) for more 

information about the closing of the coverage gap. TTY users should call 

1-877-486-2048. You can also contact your plan. 

•	 For general information about Medicare prescription drug coverage, visit 

Medicare.gov. 

•	 If you have limited income and resources, you may qualify for 

Extra Help from Medicare to help pay your prescription drug costs. 

Visit socialsecurity.gov, or call 1-800-772-1213 to apply. 

TTY users should call 1-800-325-0778.

•	 Visit stopmedicarefraud.gov to learn how to prevent, detect, and report 

Medicare fraud and abuse.

 
CLOSING THE COVERAGE GAP

CMS Product No. 11493

Revised January 2015

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