This is what people sometimes call the Medicare coverage gap. The donut hole is entered once you and your drug plan have paid a combined total of $3,750 (this is the amount for 2018; it changes yearly). You remain in the donut hole until you reach the yearly out-of-pocket limit, which is $5,000 in 2018, at which point you reach the catastrophic coverage stage. While in the coverage gap, the amount you pay for prescription drugs varies according to whether they are brand name or generic. You won’t pay more than 35 percent of the brand name cost or 44 percent of the generic cost. Find more details here.