A total of 1,306 AD patients receiving insomnia medication were included, of whom N=359 (27.5%) were adherent and N=947 (72.5%) were non-adherent. Baseline depression was common among treatment adherent and non-adherent patients (43.0% vs. 37.0%, n.s.). Among depressed patients, AD patients who were adherent to insomnia medication were less likely to have a claim for inpatient admissions(35.6% vs 45.3%, p=.054), emergency room (ER) services (55.6% vs 64.5%, p<.001), and skilled-nursing services (30.4% vs 42.0%, p=.019) compared to non-adherent. Among those with depression, total combined inpatient and outpatient medical costs were significantly lower among adherent compared to non-adherent patients; (Mean (SD) costs: $23,941($35,960) vs $36,037($48,407); median: $10,575 vs $18,797 (p=0.009).