OBJECTIVE: To determine the effect of Alzheimer's disease (AD) treatment adherence on the change in overall health care costs following AD treatment initiation in managed care. METHODS: A retrospective analysis was conducted using pharmacy, medical, and member eligibility data from a large managed care organization. Members initiating therapy between January 1, 2004 and June 30, 2004 with one of the following five AD regimens were included in the analysis: donepezil, galantamine, rivastigmine, memantine, or memantine+AChEI (acetylcholinesterase inhibitor) combination. We excluded members with previous AChEI use or who were not continuously enrolled throughout the 360-day pre-treatment and 360-day post-treatment initiation periods. Adherence was defined as the total days supplied (maximum of 360) of the AD medication initiated divided by the total days in the post-period (360 days). Change (post-treatment minus pre-treatment) in pharmacy, medical, and total (pharmacy+medical) costs was analyzed, adjusting for age, gender, comorbidities (chronic disease score), AD regimen, and pre-treatment total costs. RESULTS: A total of 2405 members were newly started on AD therapy; 65% were female and mean age was 81 years (SD 7.1). Treatment was initiated with donepezil (62%), memantine (15%), galantamine (11%), rivastigmine (8%), and memantine+AChEI (6%). Mean adherence to AD therapy was 0.57 (SD 0.36). The adjusted analysis revealed that a 0.1 adherence rate increase (for example, an increase in adherence from 0.5 to 0.6) was associated with an increase of $215 (p<0.001) in annual pharmacy costs and a decrease of $783 (p<0.001) and $568 (p=0.008) in annual medical and total health care costs, respectively. CONCLUSIONS: An increase in AD therapy adherence is associated with overall health care cost savings in the first year following treatment initiation.