OBJECTIVES: The objective was to determine the effect of nonadherence to angiotensin converting enzyme inhibitors/angiotensin receptor blockers (ACEI/ARB) and subsequent diabetes-related hospitalization and mortality among patients with diabetes enrolled in a state Medicaid program. METHODS: This is a retrospective cohort study of patients with diabetes using Medicaid pharmacy and medical claims data. Diabetic patients with continuous coverage from January 2002 to December 2004 in a state Medicaid program, and who had an index prescription claim for ACEI/ARB in the first six months of 2002 were included in the study. Adherence with ACEI/ARB therapy was measured using the proportion of days covered (PDC) during the 12-month post-index period. Nonadherence was defined as PDC<0.8. The primary outcomes of interest were diabetes-related hospitalization and all-cause mortality in the follow-up period (end of post-index period to December 31, 2004). Multivariate regression analyses were performed to assess the independent effect of nonadherence with ACEI/ARB on outcome measures. RESULTS: 14,428 patients met our inclusion criteria. Among them, 75% were females and the mean age was 60.5 (±14.2) years. About 69% were nonadherent with prescribed ACEI/ARB therapy. During follow-up, 10.9% patients had diabetes-related hospitalizations and 1.1% died for any reason. After controlling for baseline patient characteristics including age, gender, race, prior hospitalization, and comorbidities (Charlson comorbidity index), in comparison to adherent patients, the odds for diabetes-related hospital admission was 72.7% (OR: 1.727; 95%CI: 1.508-1.976) higher for nonadherent patients. The odds for all-cause mortality were not statistically significant between adherent and nonadherent patients (OR: 1.011; 95%CI: 0.721-1.419). Results of sensitivity analyses stratifying on patient age were consistent with our primary findings. CONCLUSIONS: The results suggest that nonadherence to ACEI/ARB is common among diabetic patients enrolled in a state Medicaid program. Nonadherence to ACEI/ARB appears to be associated with higher risks for diabetes-related hospitalization.