PDP is a prescription drug plan you choose separately from your hospital and doctor coverage

PDP stands for Prescription Drug Plan. It is a Medicare insurance plan that covers the cost of prescription medications. Unlike Original Medicare (Part A and Part B), which cover hospital stays and doctor visits, a PDP covers only drugs — not doctor care or hospital care. You must enroll in a PDP if you want Medicare to help pay for your prescriptions, and you choose which PDP plan to join from a list of options in your area.

PDPs are run by private insurance companies that have contracts with Medicare. Each company decides which drugs it covers, how much you pay, and which pharmacies you can use. This means the PDP you choose affects which medications are available to you and what you will pay out of pocket.

Key Takeaways

  • A PDP is a separate plan from your hospital and doctor coverage, and you must choose one if you want Medicare to help pay for prescription drugs.
  • Each PDP covers a different list of drugs at different costs, so comparing plans before you enroll can lower your yearly drug expenses.
  • You can enroll in a PDP when you first become may be able to access for Medicare, during the annual open enrollment period in October and November, or if you lose other drug coverage.
  • If you do not enroll in a PDP when you are first may be able to access and do not have other drug coverage, you will pay a penalty when you do enroll later.
  • Your PDP works alongside Original Medicare or a Medicare Advantage plan to cover your prescriptions at participating pharmacies.

How a PDP fits with your other Medicare coverage

If you have Original Medicare (Part A and Part B), you can add a PDP on top of it. The PDP pays for drugs; Original Medicare pays for hospital and doctor care. These two plans work together but are separate — you pay a premium for each one.

If you have a Medicare Advantage plan (Part C) instead of Original Medicare, that plan usually includes drug coverage built in. In that case, you do not choose a separate PDP. However, some Medicare Advantage plans do not cover drugs, so you would need to add a PDP to them.

Your PDP only works at pharmacies in its network. Before you enroll, check whether your regular pharmacy is included. If it is not, you can either switch pharmacies or choose a different PDP that includes your pharmacy.

What drugs your PDP covers and what you pay

Each PDP has a formulary — a list of drugs the plan covers. The formulary is organized into tiers, and your cost depends on which tier your drug is on. Tier 1 drugs (usually generic) cost the least. Tier 2 drugs (brand-name with generic alternatives) cost more. Tier 3, 4, and 5 drugs cost even more. Some drugs may not be on the formulary at all, meaning the plan does not cover them.

You pay a copay (a fixed dollar amount) or coinsurance (a percentage of the drug's cost) depending on your plan and the drug's tier. Early in the year, you pay these copays or coinsurance. Once you and your plan together spend a certain amount on drugs (called the "initial coverage limit"), you enter the "coverage gap" — a stage where you pay more out of pocket. After you spend enough in the gap, catastrophic coverage kicks in and the plan pays most of your drug costs for the rest of the year.

Drug costs and coverage rules change every year. Your PDP will send you a new formulary each fall, and you should review it to see if your drugs are still covered at the same cost.

When you can enroll in a PDP

You can enroll in a PDP during three main windows. The first is when you first become may be able to access for Medicare — usually at age 65. You have 63 days from the date your Medicare coverage starts to choose a PDP. If you miss this window and do not have other drug coverage, you will owe a late enrollment penalty for as long as you have Medicare.

The second window is the annual open enrollment period, which runs from October 15 to December 7 each year. During this time, you can switch to a different PDP or enroll in one for the first time. Your new coverage starts on January 1.

The third window is if you lose drug coverage — for example, if you retire and your employer stops covering your prescriptions. You have 63 days from the date you lose coverage to enroll in a PDP without owing a penalty.

The late enrollment penalty and why it matters

If you do not enroll in a PDP when you are first may be able to access for Medicare and you do not have other drug coverage (such as from an employer or the Veterans Administration), Medicare charges you a late enrollment penalty. This penalty is added to your PDP premium every month for as long as you have Medicare.

The penalty is calculated based on how long you went without coverage. The longer you wait, the higher the penalty. For example, if you become may be able to access for Medicare at 65 but do not enroll in a PDP until age 68, you owe three years of penalties. Even if you switch to a cheaper PDP later, the penalty stays the same.

You can avoid this penalty by enrolling in a PDP during your initial may be able to access window or by having other drug coverage (called "creditable coverage") during the time you are not enrolled in Medicare. If you had creditable coverage from an employer or union, keep records proving it — you may need them to avoid the penalty.

Comparing PDPs and choosing the right one for you

Because each PDP covers different drugs at different costs, the plan that is cheapest for one person may be expensive for another. The best way to choose is to compare plans based on the drugs you actually take.

Medicare provides a tool called the Plan Finder on Medicare.gov where you can enter your medications and see which PDPs cover them and what you would pay. You can also call 1-800-MEDICARE to speak with someone who can help you compare plans. Some local senior centers and Area Agencies on Aging offer free counseling to help you choose.

When you compare, look at the total yearly cost, not just the monthly premium. A plan with a low premium might have high copays, while a plan with a higher premium might save you money overall if your drugs are in lower tiers. Also check whether your pharmacy is in the plan's network and whether your doctor's office can send prescriptions there easily.

What to do if your drug is not covered or costs too much

If your PDP does not cover a drug you need, or if the copay is too high, you have options. You can ask your doctor whether a different drug on the formulary would work for you. Many conditions have multiple medications that work similarly, and switching to one your plan covers could lower your cost.

You can also ask your doctor to request an exception from your PDP. An exception is a formal request asking the plan to cover a drug that is not on the formulary or to lower your copay. Your doctor submits the request with medical reasons why you need that specific drug. The plan must respond within 72 hours for urgent requests or 7 days for standard requests.

If the plan denies your exception request, you can appeal. You have the right to ask the plan to reconsider, and if you disagree with the appeal decision, you can request an independent review outside the plan.

Frequently Asked Questions

Do I have to have a PDP if I have Original Medicare?

No, but if you do not enroll in a PDP when you first become may be able to access for Medicare and you do not have other drug coverage, you will owe a late enrollment penalty if you enroll later. If you rarely take prescription drugs, you can choose not to enroll, but understand the penalty risk.

Can I switch PDPs if I change my mind?

Yes, during the annual open enrollment period from October 15 to December 7, you can switch to a different PDP. Your new plan starts on January 1. You can also switch if you move to a different state or if your current plan is leaving Medicare.

What happens if my pharmacy is not in my PDP's network?

You can use an out-of-network pharmacy, but you will pay more out of pocket — the plan may not cover the cost at all, or it may cover less. Before you enroll, check that your regular pharmacy is in the plan's network, or be prepared to switch pharmacies.

How do I know if my employer coverage counts as drug coverage for the late penalty?

Your employer or union should tell you whether your coverage is "creditable" — meaning it is at least as good as Medicare's drug coverage. Keep any letters or documents they send you about this. If you are unsure, ask your HR department or call 1-800-MEDICARE.

Can my doctor prescribe a drug that is not on my PDP's formulary?

Yes, your doctor can prescribe any drug they think you need. However, if it is not on your PDP's formulary, you will pay the full cost unless you get an exception approved. Talk to your doctor about what your plan covers before they write the prescription.