Friday , August 17 2018
Home / Resources / Featured Writers / CMS Issues Guidance on Doughnut Hole Discount Program

CMS Issues Guidance on Doughnut Hole Discount Program

May 15, 2010

Lindsey Harris, PharmD Candidate, University of Florida


The doughnut hole has been an issue for Medicare beneficiaries for many years. The costs of drugs have many Part D beneficiaries thrown into a coverage gap that is very expensive, forcing some to go without needed medications. The Obama administration announced in June 2009 that there would be a medication discount program initiated in an attempt to deal with some of the costs. Accordingly, on April 30, 2010, the Center for Medicare and Medicaid Services (CMS) issued their initial guidance on the new discount program.

With this program, manufacturers and CMS have reached an agreement in which the manufacturer will generally cover 50% of the drug cost incurred by Part D beneficiaries in the doughnut hole. This discount is given at point of sale (POS), with the pharmacies eventually being reimbursed for the discounts. CMS has limited the discount to “date of dispensing” only. Retroactive changes to eligibility in order to, for example, adjust the discount, will not be allowed.

While originally intended to go through a third party administrator (TPA), CMS determined that model to be unfeasible due to current and next-generation HIPAA pharmacy claims of a lack of information needed to accurately bill the claims and coordinate benefits among payors. It was determined that the only entity with all necessary information and able to provide the discount POS was the Part D sponsor. As of January 1, 2011, Part D sponsors will be responsible for initial claim adjudication, calculating the discount amount, and providing the information on the adjudicated response for reimbursement to the pharmacy.

An interesting provision in the new law allows CMS the authority to cover drugs not included in the manufacturer discount program. This is only allowed provided the drug is essential to the health and well-being of the Part D enrollee or if there are extenuating circumstances in 2011 (these extenuating circumstances were determined by CMS to exist because Part D sponsors have already submitted their 2011 formularies while not knowing which drugs would be discounted). Accordingly, in 2011 only, CMS coverage of Part D drugs may include drugs not included in manufacturer discount agreements and may also mean that some brand name drugs on plan formularies will not be discounted in the coverage gap in 2011.

For further information and to view and read the guidelines, visit the link below. Comments on the guidelines will be accepted until May 14 and should be sent to with the following subject line: “Coverage Gap Discount Program.” To read a copy of the guidance memo, click here: