OBJECTIVES:  Regional variation in healthcare spending is a long standing topic of interest to health services research.  Maturation of the Part D data affords us the opportunity to examine this relationship with respect to drug spending and adherence.  Our objective is to determine if beneficiaries residing in regions characterized by high Part D drug spending exhibit higher levels of utilization and adherence to medications recommended in diabetes treatment guidelines.  METHODS: We tracked a random 5% sample of Medicare Part D enrollees diagnosed with diabetes in 2006 and 2007 (N= 236,321).  Measures included averages for Part D spending, any use, duration of therapy (DOT), and medication possession ratio (MPR) for oral antidiabetic agents, ACE-inhibitors/ARBs, and antihyperlipidemic agents.  We aggregated individual values into metropolitan statistical areas (360) and rest-of-state areas (48) and arrayed mean regional measures by deciles.  We estimated logistic and OLS regression models controlling for age, sex, comorbidity counts, and decile ranking of drug spending in each beneficiary’s region of residence.  RESULTS: Part D drug spending varied by a factor of 1.89 between the lowest ($2,613) and highest ($4,952) spending deciles.  After regression adjustments, the ratio fell to 1.49.  We found little geographic variation in prevalence of use and MPR. However, DOT was roughly one month longer in each drug class in the top compared to the bottom decile (p<.001) in unadjusted comparisons. After adjustment, differences in DOT range from 11-18 days longer for beneficiaries in the top spending decile (p<.001). CONCLUSIONS:  We found considerable geographic variation in Part D drug spending.  Almost half of the difference between the top and bottom spending deciles could be attributed to differences in beneficiary age, sex, and comorbidities.  There were no significant regional differences in user rates or MPR, but DOT for all three drug classes was significantly longer in high spending areas.