OBJECTIVES: The objective of this study was to evaluate the impact of adherence with statin therapy on diabetes-specific hospitalization and all-cause mortality among patients with diabetes enrolled in a state Medicaid program. METHODS: The authors conducted a retrospective cohort study of patients with diabetes who were continuously enrolled in a state Medicaid program from January 2002 to December 2004.  The date of the first medication claim for statin during the first six months of 2002 was the index date. Adherence to statin was assessed within one year following the index date. Adherence was assessed using the proportion of days covered (PDC) and patients with a PDC of 0.8 or greater considered being adherent. The primary outcomes of interest were diabetes-specific hospitalization and all-cause mortality during the follow-up period (end of adherence measurement to December 31, 2004). Multivariate regression analyses were performed to assess the impact of adherence with statin therapy on outcome measures. RESULTS: A total 10,839 patients were included in the study. Mean age 60.3±10.0 years, 23.8% male, 76.2 female; 31.7% white, 50.4% black. At 12 months after the index prescription, only 23.9% of patients were adherent with their prescribed statin therapy. During follow-up After controlling for age, gender, race, prior hospitalization, and Charlson comorbidity index, patients who were adherent to statin therapy were 48.7% (OR: 0.513; 95%CI: 0.421-0.624) less likely to have diabetes-specific hospital admissions in comparison to nonadherent patients. Adherence with statin therapy had no statistically significant impact on all-cause mortality (OR: 0.801; 95%CI: 0.454-1.412). CONCLUSIONS: Adherence with statin therapy was poor among patients with diabetes enrolled in a Medicaid program. Adherence with statin therapy was associated with significantly less risk for diabetes-specific hospitalization. Greater efforts are needed to facilitate diabetes self-management behaviors to improve patient outcomes.