OBJECTIVES: To examine the changes in out-of-pocket spending and financial burden of prescription drugs for diabetes between 2007 and 2010. METHODS: The Medical Expenditure Panel Survey for 2007-2010 was analyzed for patients with diabetes. Out-of-pocket spending was defined as any self-reported coinsurance and deductibles, as well as payments for prescription medications that were not covered by insurance. Financial burden for prescription drugs was measured using the proportion of out-of-pocket expenditures divided by total family income in a given year. Expenditures for each year were adjusted using Consumer Price Index. RESULTS: The out-of-pocket spending for prescription drugs for treating diabetes was dropped significantly from $232.5 in 2007 to $197.9 in 2010, while the total expenditure for prescription drugs for diabetes increased dramatically from $875.9 to $1026.3 during the same period. This declined out-of-pocket spending was observed across different age, gender, and racial groups. From 2007 to 2010, the financial burden of prescriptions drugs for diabetes increased from 0.8% to 1.1%, which was largely driven by declined annual family income ($56,139 in 2007 to $52,811 in 2010). This increasing trend was observed particularly among diabetic patients with low family income (2.3% in 2007 to 5.0% in 2010). In the contrast, the financial burden of medications was relieved for those aged younger than 18 years old (1.8% in 2007 to 0.3% in 2010). Patients receiving insulins and thiazolidinediones had higher out-of-pocket spending as well as financial burden than those used other medications to treat diabetes. CONCLUSIONS: Patients’ drug costs were reduced successfully between 2007 and 2010. However, the financial burden of prescription drugs for diabetes increased due to decreased family income. Since the use of prescription drugs is a vital part of diabetes management, more efforts should be directed to patients with low family income in order to improve affordability of prescription drugs.