Objective: To evaluate longitudinal effects of Medicare Part D implementation on dual eligible prescription gross margins (GM) for independent pharmacies and to estimate GMs for these claims if Medicare Part D had not been implemented. Methods: Dual eligible prescription claims from January 2005 to September 2006 from 344 independent pharmacies in Texas were collected. After eliminating claims from the designated lag period (January – March 2006), the dataset included 1,066,918 claims for 26,697 dual eligible patients. Claims were divided into monthly intervals allowing for an interrupted time series design. Segmented regression analysis was used to estimate the effect of Medicare Part D implementation on prescription GMs immediately and over time. The segmented regression model corrected for autocorrelation and allowed for the calculation of counterfactual GM values (as if the Part D program had not been implemented). Results: The introduction of Medicare Part D was associated with a significant change in GM per dual eligible claim, which fell almost $4.00 between December 2005 and April 2006 (p<0.001). GM per claim did not significantly change between April and September 2006. Ingredient costs after program implementation dropped significantly by $5.62 (p<0.001) and continued to fall in the second and third quarters of 2006 (p<0.004). Between December 2005 and April 2006, revenue per claim fell by $9.50 (p<0.001) and also continued to decrease through September 2006 (p<0.004). The average GM per dual eligible claim for the second and third quarters of 2006 was estimated to be 62.0% below what it would have been had Medicare Part D not been implemented ($2.43/claim with policy, $6.37/claim without policy). Conclusion: Since the majority of independent pharmacies' total revenue is from prescription drugs, the decrease in GM for dual eligible claims is a probable contributor to the financial hardship currently facing many independent pharmacies across the USA.