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This study evaluated the impact of Medicare's new drug benefit (Part D) on utilization of psychotropic medications and the consequent financial burden for the elderly population.The effect of Medicare Part D was measured by analyzing 24-month pharmacy claims collected from one of the largest retail pharmacy chains in the United States. Segmented regression analysis of interrupted time series was used to evaluate population-level changes in the utilization of the most commonly used psychotropic therapeutic categories among seniors, namely antidepressants, antipsychotics, and benzodiazepines.In the first-year implementation of Part D, the proportion of out-of-pocket payment in total pharmacy reimbursement decreased 18% for antidepressants (net savings of $4.52 per prescription) and 21% for antipsychotics (net savings of $5.71 per prescription). In contrast, the out-of-pocket share paid for benzodiazepines increased 19% (net increase of $2.79 per prescription). Part D was associated with significant month-to-month increase in use of antidepressants and antipsychotics. By December 2006, the antidepressant and antipsychotic prescriptions filled by seniors grew 7% (from 273,166 to 293,590 prescriptions per month, p<.001) and 18% (from 41,079 to 48,276 prescriptions per month, p<.001), respectively, compared with the expected level estimated from prior Part D trends. In contrast, Part D led to an immediate and sustained drop of 5% (from 238,961 to 226,622 prescriptions per month, p<.001) in number of benzodiazepine prescriptions filled by seniors.Part D has improved access to psychotropic medications covered under plans by reducing out-of-pocket expenses. However, the financial burden related to excluded medications, such as benzodiazepines, has significantly increased.