Seniors Win Battle over Medicare Part D Doughnut Hole

“Any changes to Medicare should help, not hurt, patients,” say the PhRMA ads. Yet PhRMA’s actions tell a different story.

Last February, Congress struck a bipartisan deal to help close the Medicare Part D prescription drug coverage gap, known as the ‘doughnut hole,’ a year earlier than expected. In addition, brand name drug companies are now responsible for picking up more of the cost of their products for Medicare beneficiaries who are in the doughnut hole.

The provision was part of the Bipartisan Budget Act of 2018 and was a huge win for seniors because it will help save them billions of dollars in their out-of-pocket prescription drug costs starting this year. In fact, thanks to the Part D doughnut hole deal, Medicare Part D enrollees are expected to save $1.3 billion in 2019 alone. And they will save an estimated $6.7 billion in Medicare premiums and cost sharing between 2020 and 2027.

Unfortunately, PhRMA lobbied relentlessly to roll back this bipartisan deal. PhRMA’s sticking point is what they claim is an “extra” $4 billion that drug companies will contribute to seniors’ costs while they are in the doughnut hole. The $4 billion will be spread out over 10 years among the more than 400 drug companies enrolled in the Part D coverage gap discount program. In contrast, the Medicare Part D program paid drug companies $141 billion in 2016 alone.

Let’s be clear: Rolling back the Part D doughnut hole deal would have hurt, not helped, patients.

This year, Medicare Part D enrollees will enter the doughnut hole when their total drug spending reaches a threshold of $3,820. After this point, the new law requires brand-name drug manufacturers to begin paying 70 percent of the cost of their products for people who are in the doughnut hole—up from the 50 percent they paid previously. The higher manufacturer discounts will help lower out-of-pocket costs for seniors by reducing the amount they have to pay to move through the doughnut hole and enter catastrophic coverage where their costs drop substantially.

Reversing this important improvement would have negatively impacted a population that simply cannot afford to take on higher prescription drug costs, putting their health and possibly even their lives at risk. The median annual income for Medicare beneficiaries is $26,200. Meanwhile, AARP’s most recent Rx Price Watch report found the average older American taking 4.5 medications each month faced more than $30,000 in brand name drug costs in 2017. Drug therapy is not affordable when its cost exceeds the patient’s entire income.

And let’s not forget that drug companies are reaping enormous profits as a direct result of the tax bill passed earlier this year. They were already making colossal profits before the tax bill. According to The Wall Street Journal, 10 of the largest drug companies bought back about $52.4 billion of their own shares this year, more than twice the amount they repurchased the year before. Yet none of these companies’ tax gains appear to have been passed on to patients in in the form of lower drug prices.

Poll after poll shows that prescription drug prices are a top concern among the majority of Americans. Both President Trump and leaders in Congress have said that pharmaceutical prices are too high, and something must be done to lower them. We agree.

Despite PhRMA investing millions in lobbying for a back room deal and advertising to mislead Congress and the public, they ultimately failed to roll back the Part D doughnut hole deal. This defeat was due in large part to the thousands of AARP members and volunteers who fought back on behalf of seniors by signing petitions, calling their Senators and Representatives, and speaking out forcefully.

But this fight isn’t over. Drug companies will keep spending millions on lobbying and advertising to protect their monopolies and ability to set high prices. AARP will continue to lead the fight for lower pharmaceutical drug prices, for those age 50-plus and all Americans.

The new year ushered in a new congress and gives us a prime opportunity to work on bipartisan solutions to the problem of high prescription drug prices in the U.S. In 2019, we’ll continue pressing Congress and the Administration to put Americans before drug company profits.


Nancy LeaMond is AARP chief advocacy and engagement officer. She leads the organization’s Communities, State and National Group, including government relations, advocacy and public education for AARP’s social change agenda. LeaMond also has responsibility for AARP’s state operation, which includes offices in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

You can follow her on Twitter @NancyLeaMond.