OBJECTIVES: Hemoglobin A1c (HbA1c), a clinical measure of ambient blood glucose concentrations over the previous 3 month time period, is recognized as a surrogate measure for the risk of complications among patients with diabetes. The purpose of this research is to quantify the impact of changes in glycemic control on diabetes-related medical costs. METHODS: Data from the i3 LabRx Database were used for this study. Individuals were included in the analysis if they had two diagnoses of type 2 diabetes (first diagnosis identified as the index date), had one valid HbA1c test result recorded in the six months prior to the index date and had at least one valid HbA1c test result recorded in the twelve months post index date (N=2,239). Multivariate regressions were used to examine the relationship between the change in HbA1c from the post-period to the pre-period on diabetes related costs, while controlling for patient characteristics, general health status, comorbidities, timing between the post and pre-period HbA1c tests, and initial value of HbA1c. RESULTS: Thirty percent of the individuals in this sample were found to have an initial HbA1c value greater than 7. Results from the multivariate analyses indicate that after controlling for other factors which may impact diabetes-related costs, a one point reduction in HbA1c value was associated with a $433 reduction in total one-year diabetes-related medical costs (p=0.0033). In addition, a one point reduction in HbA1c value was also associated with a significant reduction in diabetes-related outpatient costs (-$127, p=0.0268) as well as a significant reduction in diabetes-related outpatient prescription drug costs (-$293, p<0.0001). CONCLUSION: Evidence from this analysis indicates that the direct medical costs of treating type 2 diabetes are significantly reduced as HbA1c values are reduced. These results highlight that there are savings associated with a one point reduction in patients' glycemic control.