OBJECTIVES: Treatment for high-prevalence chronic diseases requires medication adherence. Improved adherence increases medication utilization, leading to higher pharmacy costs. Higher adherence, however, may reduce medical services use resulting in a decrease in overall healthcare costs despite the increase in pharmacy costs. This study examined the impact of chronic medication adherence on healthcare costs. METHODS: The study samples were three independent cohorts of individuals with the separate conditions of diabetes, hypertension and hypercholesterolemia, identified from a commercially insured health plan using integrated medical and pharmacy claims data between January 1, 2007 and December 31, 2009. Claims information of each individual was assessed for 12 months from index date (the first outpatient visit or hospitalization discharge date during 2008). Adherence was measured using Proportion of Days Covered (PDC) as endorsed by Pharmacy Quality Assurance (PQA). Healthcare costs (pharmacy, medical and total costs) were measured at two levels: all-cause and condition-specific. A generalized linear model with a gamma log link controlling for covariates was used to fit six statistical models for each cohort. RESULTS: There were 22,012, 64,600, and 59,003 individuals in the diabetes, hypertension and hypercholesterolemia cohorts respectively. At the all-cause level, increased PDC was significantly associated with decreased medical costs across the three cohorts (p<0.05). At the condition-specific level, increased PDC was significantly associated with decreased medical costs in the hypertension and hypercholesterolemia cohorts (p<0.001), but with increased medical cost in the diabetes cohort (p<0.001). Due to the large increase in pharmacy costs associated with higher PDC (p<0.001), total healthcare costs were increased (p<0.001) both at all-cause and condition-specific levels in each cohort. CONCLUSIONS: As adherence increases, the resulting savings in medical costs are not able to offset the increase in pharmacy costs. Therefore, measures that aim to lower pharmacy cost while preserving or improving adherence are needed.