Question

Jonathan has just reached the coverage gap in his Medicare Part D plan. He goes to the pharmacy to get a prescription filled. His doctor has given him two prescriptions, one for a brand-name drug, which costs $180, and one for a generic version of the drug, which costs $90. Given this scenario, please respond to the following questions:

• How much would Jonathan have to pay out-of-pocket for each of the two versions of the drug?
• What amount will be considered out-of-pocket in terms of getting out of the coverage gap for each of the two alternative drug choices?
• If Jonathan has to get this prescription filled once a month and he has a strong preference for the brand name version, how much of an additional financial burden will he face per year? If his only monthly income is $1,800 from Social Security, what possible decisions could he make in terms of his medication: Obtain the brand name drug and sacrifice more of his own money? Compromise and get the generic drug? Obtain the brand name drug but take it less often (assuming this is not a life-threatening choice)?

Answer 1

1. Calculation of amount to be paid out-of-pocket for each of the two versions of the drug:

a. For Brand name drug,

$180 x 0.25 = $45

b. For Generic drug,

$90 x 0.37 = $33.30

2. Amount to be considered out-of-pocket in terms of getting out of the coverage gap for each of the two alternative drug choices:

a. For Brand name drug,

Manufacturer discount: $180 x 0.70 = $126

Payment by Jonathan: $45

Total considered out-of-pocket in terms of getting out of the coverage gap= $126+$45= $171

The part that Medicare Drug plan pays- the remaining 5 percent of the brand name drug cost- $9 doesn't count towards Jonathan's out-of-pocket spending

b. For Generic Drug,

Only the amount paid by Jonathan will count as out-of-pocket in terms of getting out of the coverage gap, that is, $33.30 (37 percent of the total generic drug amount)

3. Additional financial burden to be faced by Jonathan per year would be,

($45 - $33.30) x 12 months = $140.40

Since Jonathan is receiving $1800 as his monthly income, he should keep using the Brand name drug since he is only paying $11.70 additionally per month to get it.

However, if there is a cost constraint, Jonathan should opt for the Generic version since he would be saving money.