OBJECTIVES: Long-term adherence to medications among type 2 diabetes patients may have an impact on health care costs and hospitalizations. This study examined differences in medication adherence, and persistence, hospitalization and health care costs between patients with type 2 diabetes enrolled in the North Carolina Medicaid newly starting thiazolidinedione (TZD) therapy and those starting other oral antidiabetic agents. METHODS: A total of 1774 patients newly starting TZD therapy between July 2001 and June 2002 were compared to 218 patients starting metformin and 1199 patients starting sulfonylureas for health care costs and outcomes in the post-medication start year. The cohorts were followed for 30 months (July 2002 to December 2004) to examine if there were any differences in outcomes such as adherence, persistence, hospitalization and total health care costs that could be associated with type of therapy. Multivariate regression techniques incorporating health care utilization in the year prior to start of new therapy were utilized to determine the net cost impact of one therapy versus the other. RESULTS: The average health care costs were less for patients on TZD [836.34 (1176.30)] as compared to other two groups. Persistence and adherence rate to TZDs was similar to other Sulfonylureas, and higher than Metformin. Multivariate analysis showed that patients on TZD therapy had significantly higher medication adherence while metformin users had significantly lower medication adherence as compared to sulfonylureas. Patients on TZD therapy were associated with decreased likelihood of hospitalization and decreased number of hospitalizations as compared to sulfonylureas users. Adherence to new therapy was significantly associated with decreased number of hospitalizations. CONCLUSIONS: Long-term use of thiazolidinedione therapy in a Medicaid-enrolled type 2 diabetic population was associated with significantly greater treatment adherence, and reduced hospitalization in the post-start year compared to patients starting other oral antidiabetic agents.