OBJECTIVES:  Given the high costs of oral chemotherapy agents, Medicare cancer survivors are particularly vulnerable to Part D coverage gaps. However, few studies have focused on the economic burden associated with the initiation of oral chemotherapy. We examined the use of oral chemotherapy drugs and the entry rate into the coverage gap for elderly Medicare beneficiaries with cancer. METHODS: A retrospective cross-sectional study was conducted using national representative sample obtained from Medicare Current Beneficiary Survey. Cancer patients aged over 65 who continuously enrolled in Medicare Part A during 2006 through 2010 were included in the analysis. Selected oral chemotherapy drugs were identified using pharmacy claims and self-reports. Drug costs and entry into the gap were compared between with vs. without oral chemotherapy. Logistic regression models were used to predict the probability of falling into coverage gap. Generalized linear models were used for healthcare costs. RESULTS:  The study sample included 7,665 Medicare beneficiaries with cancer. Beneficiaries filling oral chemotherapy agents had significantly higher drug costs ($7,305 vs. $2,676; p<0.001) and out-of-pocket costs ($4.263 vs. $ 1,396; p<0.001), compared to those without oral chemotherapy. In 2006-2010, 38.8% cancer beneficiaries without oral chemotherapy reached the coverage gap, while 84.3% beneficiaries having oral chemotherapy reached the gap. After adjusting for socio-demographic and clinical characteristics, the use of oral chemotherapy drugs was associated with a 10.7 times increased risk in reaching coverage gap (Odds Ratio [OR]=11.7, 95% confidence interval [CI]= 8.9-15.5), and $2,167 more in out-of-pocket costs for prescription drugs. The predictors of falling into coverage gap include race, income, having low income subsidy or other drug benefits, and number of chronic conditions. CONCLUSIONS:  The majority of beneficiaries receiving oral chemotherapy had high out-of-pocket drug costs and reached coverage gap. Beneficiaries who had low socioeconomic status or more clinical conditions were at particularly high risk for reaching coverage gap.