Objective To develop and test incident drug user designs for assessing cost savings from statin use in diabetics. Data Source Random 5 percent sample of Medicare beneficiaries, 2006–2008. Study Design Seven‐step incident user design to assess impact of statin initiation on subsequent Medicare spending: (1) unadjusted pre/post initiation test; (2) unadjusted difference‐in‐difference (DID) with comparison series; (3) adjusted DID; (4) propensity score (PS)‐matched DID with static and dynamic baseline covariates; (5) PS‐matched DID by drug adherence strata; (6) PS‐matched DID for high adherers controlling for healthy adherer bias; and (7) replication for ACE‐inhibitor/ARB initiators. Data Collection/Extraction Methods Subjects with prevalent diabetes and no statin use (January–June 2006) and statin initiation (July 2006–January 2008) compared to nonusers with a random “potential‐initiation” month. Monthly Medicare spending tracked 24 months pre‐ and post‐initiation. Principal Findings Statistically significant savings in Medicare spending were observed beginning 7 months post‐initiation for statins and 13 months post‐initiation for ACEIs/ARBs. However, these savings were only observed for adherent patients in steps 5 and 6. Conclusions Drug initiator designs are more robust to confounding than prevalent user designs in assessing cost‐offsets from drug use but still require other adjustments and sensitivity analysis to ensure proper inference.