OBJECTIVES: This study compares the one-year direct schizophrenia-related treatment costs, mental health care costs and total health care costs of uncontrolled schizophrenia patients initiated on olanzapine versus risperidone. METHODS: The integrated medical and pharmacy claims of a large, geographically diverse, commercially insured population were used to conduct this analysis. Patients who initiated treatment with either olanzapine or risperidone and had one inpatient or two outpatient services for schizophrenia within 30 days prior to initiation of drug of interest were included in this analysis. Treatment course and associated schizophrenia-related, mental health care and total health care costs during the subsequent 12-month period were examined using univariate and multivariate methods. RESULTS: Four hundred thirty-one (431) patients initiated on risperidone and 142 initiated on olanzapine met inclusion criteria. The mean dose was 4.34 and 11 for risperidone and olanzapine patients, respectively. During the one-year period after initiation of drug of interest, olanzapine patients (compared with risperidone patients) were less likely to be hospitalized and had shorter mean length of hospital stays for schizophrenia-related causes, mental health care causes and all causes. Although pharmaceutical costs were significantly higher, medical costs were significantly lower for patients on olanzapine compared to those on risperidone. Univariate and multivariate analyses (controlling for potential confounding factors such as patient demographics, disease severity and comorbidities) consistently demonstrated that olanzapine patients had significantly lower schizophrenia-related costs ($2,839 less, p<0.05), lower mental health care costs ($3,744 less, p<0.005) and lower total health care costs ($4,674 less, p<0.001) than those patients initiated on risperidone. CONCLUSIONS: The findings revealed significant differences between olanzapine and risperidone in the treatment of uncontrolled schizophrenics in clinical practice. Olanzapine patients incurred lower costs (lower schizophrenia-related, mental healthcare and total healthcare costs). The lower costs were inpatient driven by fewer hospitalizations and shorter length of hospital stays in the olanzapine treatment group.