OBJECTIVES: To examine the impact of plan formulary coverage on drug consumption and medication adherence of Low-Income Subsidy (LIS) recipients randomly assigned into benchmark standalone Prescription Drug Plans (PDPs) in Medicare Part D. METHODS: Using CMS administrative data on Medicare Part D claims and plan formulary coverage, we simulate out-of-pocket spending in all available plans in her service area among our working population in 2010 (N=691,681) and 2011 (N=701,797), and construct a single measure of plan generosity as plan-level Average Simulated Beneficiary Cost Sharing (ASBCS) over all beneficiaries in the service region, assuming that beneficiaries pay CMS defined copay for on-formulary claims and full cost for off-formulary drugs. We identify randomly assigned LIS beneficiaries in our working population, and analyze how plan generosity affect drug consumption and medication possession ratio (MPR) of chronic drugs. RESULTS: ASBCS has wide variation among benchmark PDP plans, ranging from 7.9% to 33.5% in 2010, and from 8.8% to 30.3% in 2011. LIS beneficiaries enrolled in the bottom quartile ASBCS plans (most generous) has total drug consumption $800 more than beneficiaries in the top quartile ASBCS plans (least generous). After controlling for demographics, health status, state of residence and income, 10 percent increase in average beneficiary cost-sharing leads to decrease in total drug consumption by $310-$430, and 0.7 percent reduction in Medication Possession Ratio of chronic drugs among randomly assigned LIS beneficiaries.  CONCLUSIONS: Plan formulary coverage has an important impact on drug consumption and medication adherence among LIS beneficiaries.