OBJECTIVE: To determine the change in schizophrenia-related total direct medical costs following initiation of olanzapine or risperidone therapy. METHODS: The MEDSTAT Group’s MarketScan database was used to obtain data on inpatient, outpatient, and prescription drug claims. This database represents the healthcare experiences of individuals employed in large organizations in the US, as well as the dependants of those individuals. Data between 1996 and 1999 were analyzed. Patients with a diagnosis of schizophrenia, and initiating either olanzapine or risperidone pharmacotherapy were included in the study data set. Inpatient, outpatient, and medication costs were assessed for one year prior to, and one year following the initiation of olanzapine or risperidone. RESULTS: A total of 162 patients on olanzapine and 119 patients on risperidone were identified. There were no significant differences between the two groups in either patient demographics, or resource use in the year prior to initiation of the medications. However, patients initiating on olanzapine incurred higher total schizophrenia-related direct medical costs in the year prior to initiation. The mean initial dose of olanzapine was 11.5 mg, while the mean initial dose of risperidone was 4.5 mg. For patients initiating on olanzapine, there was no significant difference in the change in schizophrenia-related total direct medical costs ($4,337.37 to $5,216.17; p = 0.45) compared to the costs in the year prior to initiation. This is because the higher medication costs in the treatment period were partially offset by lower inpatient costs associated with olanzapine. For patients initiating on risperidone, there was a statistically significant increase in schizophrenia-related total direct medical costs ($2,751.25 to $4,995.01; p = 0.04) compared to the costs in the year prior to initiation. CONCLUSION: The results of this study demonstrate that while initiation of treatment for schizophrenia with olanzapine is not associated with higher total schizophrenia-related direct medical costs, initiation with risperidone is associated with significantly higher total schizophrenia-related direct medical costs over one year.