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Part D "Donut Hole"

What's the Donut Hole? Good question—we'll explain.
What's the Donut Hole? Good question—we'll explain.

The "Donut Hole" is a coverage gap

Most Medicare Part D drug plans have a coverage gap-also known as the "donut hole"—which limits what the drug plan will cover after a certain dollar amount is reached.

In 2016, once you and your plan spend $3,3101 on covered drugs (the combined amount plus your deductible), you'll be in the coverage gap. The gap extends until you reach $4,850 in out-of-pocket costs, at which point you are in what's called catastrophic coverage.

Initial Benefit


Donut Hole

$3,311 - $4,850

Catastrophic Coverage


The good news: pharmacies like Walgreens provide discounted prescriptions for Part D recipients in the coverage gap. So you can stick with your preferred Med D plan and save money on prescriptions when you use Walgreens pharmacy, even while you're in the donut hole.

Brand-name vs. generic discounts

For covered brand-name prescription drugs, your 2016 discount is 55%. You pay 45%, but the entire price counts as out-of-pocket costs, which helps you get out of the donut hole.

For generic prescription drugs, you'll pay 58% of the cost in 2016. (This amount will decrease each year until it reaches 25% in 2020.) With generic drugs, only the amount you pay counts towards getting you out of the donut hole.

There's no need to apply for these coverage gap discounts or fill out any forms.

Who qualifies to receive these discounts?

You're eligible if: A) you are enrolled in a Medicare prescription drug plan or a Medicare Advantage plan that includes prescription drugs, and B) you don't receive Extra Help, a Medicare program to help people with limited income.

You'll receive the discounts on the drugs covered by your plan once you reach the coverage gap.

What do I need to do?

You'll need to pay your premiums and your brand-name and generic out-of-pocket drug costs from the time you meet your deductible (if your plan has one) until you reach catastrophic coverage. If your costs exceed the catastrophic coverage level, you'll be responsible for 5% of your prescription drug costs for the rest of the year.

It's important to continue to stick with your prescription drug plan and pharmacy once you hit the coverage gap. If you have a Medicare prescription drug plan that already includes coverage in the gap, 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.

Here's what counts towards the coverage gap:

  • Your yearly deductible, coinsurance, and copayments
  • The discount you get on brand-name drugs in the coverage gap
  • What you pay in the coverage gap

Here's what doesn't count:

  • Your drug plan premium
  • The pharmacy dispensing fee
  • What you pay for drugs that aren't covered

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