Ilovebenefits’s Blog

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Editor’s note: As you read the following remember two things. First, drug manufacturers have been ‘threatened’ with the prospect of government ‘negotiations’ over drug prices. Second, one person’s cost is another person’s revenue. Who’s ox is ultimately gored here. You can bet it won’t be the drug manufacturer.




Under the standard Medicare Part D drug benefit, coverage for prescription drugs stops after a person spends $2,700. Medicare beneficiaries then pay 100% of the costs until their total drug spending hits $6,153.75, at which point catastrophic coverage kicks in.  This gap in coverage is known as the “doughnut hole.”  In 2007, nearly 3.85 million Medicare beneficiaries fell into this gap in coverage.

The Agreement

  • Under the arrangement announced today, the Senate Finance Committee’s version of health reform legislation will contain a provision whereby pharmaceutical manufacturers will provide discounted prescription drugs to Medicare beneficiaries between the incomes of $16,245 (single)/$21,855 (couple) and $85,000 (single)/$170,000 (couple) who suddenly lose coverage for their prescription drugs when their expenditures reach the “doughnut hole.”  Beneficiaries with incomes below $16k/$21k already receive subsidies for the cost of their drugs in the “doughnut hole.”  This agreement will extend discounted drug benefits to millions of additional Medicare beneficiaries.
  • With this announcement, when health reform is enacted into law, a new group of Medicare beneficiaries will receive a 50 percent discount on drugs that now fall within this gap. Medicare beneficiaries will automatically be enrolled in this program and will receive the 50 percent discount when they obtain a prescription at the pharmacy or through a mail service pharmacy.   The Secretary of Health and Human Services will contract with an independent third party administrator to oversee the operation of this program and to ensure that participating manufacturers are making discounted drugs available to eligible beneficiaries during the period they are in the “doughnut hole.” 
  • This reform will help close the “doughnut hole,” make prescription drugs affordable for millions of seniors who need them.  It will bring a long-sought measure of fairness to Medicare Part D.  

Enforcement Mechanism

Pharmaceutical companies that wish to make their products available through Medicare Part D must participate in this program. 


June 22, 2009 - Posted by | Cost, Economics of Health care, Federal Government | , , ,

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