This term pertains to Medicare prescription drugs.
Most plans with Medicare prescription drug coverage (Part D) have a coverage gap called a "donut hole."
This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit.
Once you have spent up to the yearly limit, your coverage gap ends and your drug plan helps pay for covered drugs again.
See the term donut hole for more details and dollar amounts.