OBJECTIVES To examine the out of pocket spending on psychotropic medications by elderly Medicare beneficiaries before and after the implementation of Medicare Part D. METHODS The effect of Part D was measured using 2005-2006 pharmacy claims data from one of the largest retail pharmacy chains in the United States. The psychotropic medications examined in this study included antidepressants, antipsychotics benzodiazepines and barbiturates. In addition to evaluating overall out of pocket burden in 2005 and 2006, the study examined out of pocket burden among Medicare-Medicaid dual eligible beneficiaries, non-dual Part D enrollees, and those who did not enroll in Medicare Part D. The out of pocket burden was calculated as a percentage of total pharmacy reimbursement involving elderly persons 65 years or older. RESULTS The proportion of out of pocket expenditures in total pharmacy reimbursement dropped 7.62% (from 40.43% to 32.81%) for antidepressants, 6.24% for antipsychotics (from 27.82% to 21.58%), but increased 12.15% for benzodiazepines (from 62.64% to 74.79%), and 9% (from 71.96% to 80.56%) for barbiturates. Dual eligible beneficiaries were the group most severely affected by the policy change. For dual eligible beneficiaries who were on any of the four drug categories, their yearly out of pocket expense increased extensively. The most dramatic change was observed in dual eligibles using benzodiazepines. Their out of pocket expenditure increased by around 12 folds from 2005 to 2006. Non-dual Part D enrollees benefited the most from the new drug policy. The most significant cost saving was found in non-dual Part D enrollees who were on antidepressants (from 62.23% to 32.97%) and antipsychotics (from 55.24% to 38.30%). CONCLUSIONS The implementation of Part D was associated with reduced out of pocket psychotropic prescription burden on non-dual Part D enrollees, however, out-of –pocket burden on the dual eligible beneficiaries severely increased.