OBJECTIVE: To compare the costs of prescriptions dispensed through mail order and retail pharmacies. We examined total costs, costs to health plan sponsors, and costs to health plan members. METHODS: We compared the actual cost of prescriptions dispensed through a mail order pharmacy with what those same prescriptions would have cost if dispensed through retail pharmacies. We based our analysis on prescription claims submitted to a health plan in the northeastern United States between July 1, 2002 and June 30, 2003. The plan covered about 100,000 members. The plan used a mail-order pharmacy that was not owned by a major PBM, a 3-tier benefit design, and specified that patients' could get a 90-day supply through mail order for the equivalent of two 30-day retail copays. Retail pharmacies were paid a $2.00 dispensing fee per 30-day supply dispensed. The mail-order pharmacy charged no dispensing fee. For brand name drugs, the plan paid AWP less 15% to retail pharmacies and AWP less 17% to the mail-order pharmacy. RESULTS: Total costs for the 44,847 prescriptions dispensed through mail order were $6,401,624. Had these prescriptions been dispensed at retail, costs would have been $6,902,252. Ingredient costs were $6,401,624 through mail versus $6,633,170 at retail. Total costs to the health plan were $4,726,637 through mail versus $4,417,733 at retail. Member costs were $1,674,987 through mail versus $2,484,519 at retail. CONCLUSIONS: Mail order was less expensive overall, but more expensive to the health plan. The loss of copays in the mail order plan was greater than the savings on ingredient costs and dispensing fees.