OBJECTIVES: To identify factors associated with total annual health care expenditures for Medicaid patients prescribed a Long Acting Opioid (LAO) medication for chronic pain management. The LAOs considered were transdermal fentanyl (TF), controlled release morphine sulfate (CRMS) and controlled release oxycodone (CRO). METHODS: Medicaid beneficiaries from three states during 1999 - 2000 were studied. Patients were followed for at least one year, starting with their first LAO prescription in 1999. Patients who did not have a LAO in the six months prior to that index date were labeled 'incident', while patients with a history of LAO use were labeled as 'prevalent'. Patients were then grouped by the opioid they received on the index date. Disease-type, demographics, health status, health care utilization, and expenditures were measured and compared among the three LAO cohorts. LAO costs and total annual health care expenditures by LAO cohort were compared using descriptive and multivariate analyses, for the incident and prevalent patient samples. RESULTS: Descriptive results indicate that incident (I) and prevalent (P) LOA annual cost for CRO ($1361 I; $4146 P) were significantly higher than costs observed for TF ($1202 I; $3,061 P) or CRMS ($919 I; $3572 P) (p <0.01). After controlling for confounding characteristics, total annual health expenditures in the CRO incidence sample were similar to the CRMS sample. However, total annual health care expenditures for the CRO population were significantly lower than expenditures for the TF population, with an annual cost savings of about $960 (p <0.01). Economic differences were not noted among the prevalent LAO populations. CONCLUSIONS: Total cost, not just pharmaceutical costs, should be considered when making policy decisions about insurance coverage for LAO drugs. In the incident sample, patients on TF cost about $960 more per year (p <0.01), on average, compared to similar CRMS and CRO patients.