What Is PDP? Medicare Prescription Drug Plans Overview

Your Original Medicare benefits are divided into two parts: Part A coverage for inpatient hospital services and Part B partial coverage for outpatient medical services such as doctor's office visits and lab work. Original Medicare, however, does not typically cover prescription drugs. 

Medicare beneficiaries can consider a Medicare Part D Prescription Drug Plan (PDP) to get help paying for their prescription medications. A PDP works alongside your Original Medicare benefits to cover some of the costs of many retail prescription drugs.

You can compare Medicare PDPs online or call to get help from a licensed insurance agent who can help you compare plan costs and find a plan that covers your drugs.

Many Medicare beneficiaries choose to get their Part D Medicare drug coverage through a Medicare Advantage (Medicare Part C) plan that includes Part D benefits. This type of plan is called a Medicare Advantage Prescription Drug (MA-PD) plan, and in 2024, nearly 7 in 10 beneficiaries (66%) get their Medicare drug coverage through a Medicare Advantage plan with a $0 monthly premium.¹

What Is PDP? 

Also called Part D coverage, a PDP is a standalone plan that offers only prescription drug coverage.

Older adults and disabled individuals who receive Medicare benefits are at risk of going into debt to ensure access to life-saving prescription medication. In some circumstances, a single drug not available in generic form can cost thousands per month. For Medicare beneficiaries on a fixed income, this monthly expense is significant and may result in lack of access to treatment. 

When Did Part D Start? 

Standalone prescription drug plans are a result of Part D, which was signed into law by President George W. Bush. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) led to the expansion of Medicare coverage to include outpatient prescription drugs for the first time in history. Prior to MMA, outpatient drugs were not covered by Medicare. 

What Is the Difference Between PDP and PPO? 

Since the launch of Medicare Advantage plans, many Part C plans are designed with both in and out-of-network benefits. Plan types that offer benefits for both network and non-network providers are PPOs (Preferred Provider Organization). A PPO is not the same as a PDP. While some PPO plans do include prescription drug coverage, they are not required to. Individuals with traditional Medicare (Parts A and B) or a Part C plan with only medical coverage may consider adding a PDP plan to their benefits to offset drug costs. 

Is Part D Coverage Required? 

Part D coverage through Medicare is not required, but drug coverage, in general, is highly recommended because the cost of brand name drugs can vary greatly.

Though not a requirement, drug coverage through Part D should be attained as soon as possible. If you decline to enroll in Part D coverage when you're first eligible and later decide you need it, you may be assessed a Late Enrollment Penalty (LEP) for each uncovered month. At the time you choose to sign up for a PDP, the carrier may ask you for proof of creditable coverage. This helps determine if LEP applies to you. 

Do I Have to Pay LEP? 

If you are unable to show proof of creditable coverage for prescription drugs, LEP will be added to your monthly premium and is a required fee. Should you feel the decision to apply an LEP is unwarranted, you do have appeal rights as established by the Centers for Medicaid and Medicare Services (CMS). You have 60 days from the date you receive an LEP notice to ask for a reconsideration. It's important to note that individuals who receive "Extra Help" from Medicare to pay for drug costs do not have to pay an LEP.

Do I Have to Use Certain Pharmacies With a PDP? 

Most pharmacies accept Medicare, but the PDP you're enrolled in may have preferred pharmacies. Filling your prescriptions at a preferred pharmacy may result in lower out-of-pocket drug costs. You may also be eligible for mail-order prescriptions depending on your plan. Check with your PDP carrier to confirm pharmacy network status and drug costs. 

What Are the Stages of Part D Coverage? 

PDP policies are structured into four coverage phases. Here is a quick breakdown of each: 

• Annual Deductible: This is the amount you pay before your annual coverage kicks in. 
• Initial Coverage: This stage is when your PDP begins to pay its share of cost for covered prescription drugs. 
• Coverage Gap: Once the amount you and your plan pay for prescription drugs reaches Medicare's annually determined limit, you will hit the coverage gap unless you receive "Extra Help" from Medicare. 
• Catastrophic Coverage: The amount you and your plan paid toward drugs in the coverage gap must hit a Medicare-determined limit before you enter the catastrophic coverage phase. In this phase, you are only responsible to pay a small cost share for generic and brand-name drugs. 

What Is a PDP Formulary? 

Your PDP carrier has a predetermined list of covered drugs, excluded drugs and plan restrictions assigned to each plan. Obtain a copy of your plan's formulary and share it with your prescribing physicians. Sometimes, your physician can guide you to treatment options that are more cost-effective based on your plan's formulary rules.

You can compare Medicare PDP plans and enroll online, if you're eligible. You can also call a licensed insurance agent who can help walk you through the comparison and enrollment process.