Objective: To analyze the impact of formulary restrictions on adherence to second generation antipsychotics (SGAs). Methods: A retrospective cohort study was conducted on data from a national pharmacy benefit management company covering January 1, 2004 to December 31, 2005. Patients =18 years of age newly treated with SGAs (aripiprazole, olanzapine, quetiapine, risperidone, ziprasidone) were followed for up to 1 year after index prescription. The two cohorts were categorized as: open formulary (all SGAs on formulary without restriction), and/or restricted formulary (any SGA not on formulary, or any formulary SGA requiring step therapy or prior authorization). Logistic regression was used to determine the main effect of formulary category on medication adherence (medication possession ratio [MPR] =0.8) and the probability of changing index medication regimen (switching to or adding another drug, or discontinuing index drug), adjusting for co-pay, patient demographics, geographical location, concomitant medications, index drug and health plan type. Results: The study sample included 5017 patients (45% male) with a mean age of 46.2 years (SD 16.2). Patients in open formulary plans were significantly more likely to be adherent than patients in restricted formulary plans (OR=1.14, 95% CI: 1.05–1.23), and were significantly less likely to change their index regimen (OR=0.91, 95% CI: 0.84–0.99). Patients in single-tier formularies were significantly more likely to be adherent than those in two-tier formularies (OR=1.21, 95% CI: 1.15–1.27) and less likely to change their index regimen (OR=0.8, 95% CI: 0.75–0.85). Higher co-pays were associated with significantly lower adherence (OR=0.95, 95% CI 0.93–0.98) but a lower likelihood of changing index regimen (OR=0.98, 95% CI:0.96–1.00). Conclusion: Patients newly started on SGAs are more adherent and less likely to change their initial medication regimens on open formulary plans than on restricted plans. Formulary restrictions may adversely impact treatment continuity in patients new to SGA therapy.