OBJECTIVE In addition to weight reduction, there may be other benefits of obesity treatment including improved insulin sensitivity. The purpose of this study was to characterise concomitant diabetes drug use and the related costs in diabetic patients treated with orlistat in the first six months of weight management. Methods One hundred overweight diabetic patients were enrolled in a structured weight management clinic and treated with orlistat plus behavioural interventions.  Among other measures, weight, glucose control (HbA1c) and drug treatments were recorded. Subjects were followed-up for a maximum of 24 months at intervals of 6 months, with a maximum treatment period of 24 months. Results The majority of subjects (90%) had type-2 diabetes. They had a median age of 55 years (IQR 47- 63) and 55% were women. The mean BMI at baseline was 39.51 with a mean HbA1c of 7.56%. The mean reduction in weight at 6 months was 7.1kg (p<0.001), with an average absolute HbA1c improvement of 0.62% (p<0.001).  Of the 50 patients treated with insulin at baseline, three no longer required insulin by the 6 month follow up.. Of those treated with insulin, the mean insulin dose was 130iu (SD 135.4) at baseline and 90iu (SD 125.4) at 6 months (p<0.001). Twenty patients (45%) initially treated with oral hypoglycaemic agents alone reduced their dose after 6 months.  Despite marked improvement in insulin sensitivity (baseline mean 1.24iu/kg : 6 month mean 0.90iu/kg (p<0.001)) there was no correlation with BMI change. The average cost of diabetes treatment was £0.82 per day at baseline and £0.59 at 6 months (D 28%; p<0.001).  Conclusions Orlistat therapy, in conjunction with a structured weight management programme, appears to reduce the need for concomitant diabetes medication irrespective of weight loss. This reduction is likely to translate into a large cost offset for orlistat treatment.