OBJECTIVE: Many Medicare enrolled veterans view the Department of Veterans Affairs (VA) as a preferred source of pharmacy services, even when they have access to pharmacy coverage elsewhere. With the implementation of the Medicare pharmacy benefit imminent, the objective of these analyses was to examine how one alternative source of pharmacy care, Medicare managed care (HMO) enrollment, affects the use of VA pharmacy services. METHODS: We combined national calendar year (CY) 2002 Medicare enrollment data for Medicare-enrolled VA users with pharmacy cost records from the VA's national Decision Support System (DSS) files. VA users were identified as a Medicare HMO enrollee if they were enrolled in a Medicare HMO at any time during CY 2002. RESULTS: In CY 2002, 2.3 million Medicare enrolled veterans (5.4% of all Medicare beneficiaries) received medications from the VA, at a total cost of $2.4 billion (68% of all VA pharmacy costs). Across the 127 individual VA medical centers (VAMCs) there was wide variation in the percentage of HMO enrollees among Medicare enrolled pharmacy users (from < 1% to > 49%) and in the percentage of pharmacy costs associated with their use (from < 1% to > 41%). HMO enrollees were just as likely as non-enrollees to use VA pharmacy care, although the average annual cost of their care was lower -- $847 per year [sd = $1,969] versus $1,101 [$2,794] for non-enrollees (p £ .0001). CONCLUSIONS: VA users who are enrolled in Medicare HMOs continue to use VA pharmacy services, even though the large majority of them have access to pharmacy coverage through their HMO plans. Although the implementation of the Medicare prescription drug benefit in 2006 is expected to increase access to prescription drugs for Medicare beneficiaries, the VA will likely remain a significant pharmacy provider for Medicare enrolled veterans.