OBJECTIVES: To estimate annual health care costs associated with hypoglycemia among T2DM patients initiated on oral antidiabetic drugs (OADs) in a large managed care cohort with managed care insurance benefits. METHODS: T2DM patients initiated on OADs were selected from the Ingenix Impact database (1999-2008). Patients aged 18 years or older with at least 1 year of continuous eligibility following the index date (the first OAD prescription fill date) who were diagnosed with moderate to severe hypoglycemia events (ICD-9-CM 250.8x, 251.0x, 251.1x, 251.2x) were identified. Annual total, medical, pharmacy, and diabetes-related costs for patients with or without the diagnosis of hypoglycemia were compared during the 12-month post-index period. Diabetes-related medical costs included all non-pharmacy costs associated with T2DM diagnosis. Generalized linear regressions with robust standard error accounting for skewed cost distribution were performed, adjusting for demographics, comorbidities, and OADs. RESULTS: A total of 212,061 T2DM patients with at least 1 OAD treatment were identified. Among them, 4,860 (2.29%) had a hypoglycemia diagnosis during the first year following the index date. Patients with hypoglycemia had significantly higher average annual total costs ($18,273 vs. $8,908, P<0.001) and diabetes-related total costs ($8969 vs $3220, P<0.001) than those without hypoglycemia. After adjusting for confounding factors, hypoglycemia patients had significantly higher incremental annual total costs and diabetes-related total costs than patients without hypoglycemia ($5031 and $3751, respectively, both P<0.001). Similar trends were observed for annual medical costs and diabetes-related medical costs ($4967 and $3796, respectively, both P<0.001).   CONCLUSIONS: Hypoglycemia in type 2 diabetes patients initiated with OADs in a large US managed care setting is associated with significantly higher total, medical, and diabetes-related costs compared with those who did not experience hypoglycemia.