OBJECTIVES: The clinical effectiveness of exenatide and glargine is well established for the treatment of type 2 diabetes (T2D).  However, the relative economic and utilization impact of these therapies is uncertain.  This study examined the cost offsets associated with the use of exenatide compared to glargine in patients with T2D.   METHODS: A retrospective analysis was conducted using a large, managed care claims database.  Adult patients with T2D who had initiated either exenatide (N=9264) or glargine (N=3791) therapy between April 1, 2005 and June 30, 2007 with pre- (6 months) and post-index (12 months) continuous eligibility were included.  Annual mean total medical costs and several mean cost components were estimated using propensity score stratification to control for baseline demographic, clinical and resource utilization variables.  Mean costs were estimated using nonparametric bootstrapping.   RESULTS: Exenatide-treated patients had significantly lower total direct medical ($20,792 vs. $24,954, p<0.0001), inpatient ($4,836 vs. $6,966, p<0.0001), outpatient ($9,510 vs. $11,858, p<0.0001), and emergency room (ER) costs ($96 vs. $131, p=0.04). Exenatide-treated patients had higher total prescription costs ($6349 vs. $6000, p=0.0004).  Furthermore, exenatide-treated patients had significantly lower costs of hospitalization ($4802 vs. $6873, p<.0001) mainly due to lower macrovascular complications ($1620 vs. $2661, p=0.001), and also lower office visit costs ($3317 vs. $4176, p<0.0001) and hospital outpatient visits ($5144 vs. $6608, p<0.0001) compared to glargine-treated patients. Although prescription costs of exenatide was higher than glargine ($1544 vs. $843, p<0.0001), exenatide-treated patients incurred significantly lower costs of concomitant antidiabetic medications ($1283 vs. $1415, p<0.0001) and other prescription medications ($3235 vs. $3438, p=0.015) compared to glargine-treated patients.   CONCLUSIONS: Patients who initiated exenatide treatment had significantly lower total medical costs mainly due to lower inpatient, outpatient and ER visits despite having higher total prescription costs.  Although, the index-drug costs were higher for exenatide, cost savings were observed in hospitalizations, office visits, and hospital outpatient visits.