NCPA - National Center for Policy Analysis


November 27, 2007

The Medicare doughnut hole -- the nickname for a big financial gap in each person's Medicare prescription drug coverage -- could be a positive public policy trend because it potentially forces Medicare enrollees to pay more from their own pocket during the gap period, helping curb growth in the nation's drug spending by pushing people toward low-cost generic drugs, says the New York Times.


  • About 4.2 million people reached the gap last year, according to the research firm Wolters Kluwer, and many of them switched to generics as a way to keep their out-of-pocket costs low.
  • Others started using generic drugs even before they reached the doughnut hole to avoid the higher co-payments their policies charged for brand-name drugs.
  • In 2006, an estimated 59.6 percent of the Part D prescriptions were filled by generic drugs.
  • By the first quarter of 2007, the most recent period for which data are available, the generic rate in Medicare had edged higher, to 61.5 percent, according to Medicare figures.

According to Kerry N. Weems, the acting Medicare administrator, the doughnut hole was not the only reason that generics were on the rise.  The Part D program has made consumers more price-conscious, he said, noting that Medicare's Web site lists the prices of pharmaceuticals dispensed at each drugstore participating in a particular Medicare plan.  "It will show you month by month for the entire year what your yearly expenditures are," he says.

Source: Stephanie Saul, "Strategies to Avoid Medicare's Big Hole," New York Times, November 24, 2007.

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