OBJECTIVE: This study investigated the effect of age, gender, and out-of-pocket expenditures on medication use and the time to discontinuation among patients with Type 2 diabetes (T2D). METHODS: Patients' pharmacy and medical data were obtained from a proprietary claims database. T2D patients, 18 years and above, on oral anti-diabetic drugs, who received benefits from managed care organizations in the year 2000 were identified. The effects of age, gender, and co-payment on the time to medication discontinuation were estimated. A medication was considered discontinued when the prescription was not refilled at the end of its day's supply for an additional 50% of day's supply. Co-payments within 1-week intervals were analyzed in a time-dependent Cox regression model to measure their impact on discontinuation. RESULTS: Approximately 11,350 patients were identified with T2D. The median co-payment per prescription was $8.30. The time-dependent Cox regression model showed that the risk of medication discontinuation was 8% higher for every $5 increase in co-payment [Hazard's ratio=1.015]. Females had a 6% higher risk to discontinuation than males (p=.04). Patients age 62 and over have a 67% higher risk of discontinuing their medication than patients under 61 years (p < .01). CONCLUSIONS: Out-of-pocket prescription medication costs maybe a potential barrier to medication persistency. Co-payment, in addition to age and gender, significantly impacted the prescription discontinuation. Lack of routine and timely care has been documented to result in a consequent transfer of these costs for severe health episodes to payers. Policies intended to reduce patient non-compliance should be supported by managed care organizations.