Background: High costs of oncology drugs have threatened the affordability of cancer care. Previous research using data from privately insured non-elderly cancer patients (pts) showed that both the trends of rising prices at launch and of sustained price increase post-launch were more pronounced among targeted oral anticancer medications (TOAMs) compared to targeted intravenous drugs. This study explored the financial burden of TOAMs on Medicare program and beneficiaries. Methods: Using SEER linked to Medicare Part D, 2007-2012, we determined the list of TOAMs from the NCI’s Targeted Cancer Therapy Fact Sheet and identified TOAM users via the National Drug Code in Part D claims. We calculated cost per pt per month (PPPM) by aggregating costs (gross drug costs and out-of-pocket (OOP) payments) of all TOAM claims divided by the total number of months a pt was treated with any TOAM. Results: The study cohort included 37,117 pts who received TOAM between 2007 and 2012. The top five cancers among TOAM users were lung (33%), myeloma (23%), kidney (8%), liver (7%), and leukemia (7%). While the prescription drugs category of medical care consumer price index (CPI) grew at 3.3% per year in the 2007-2012 duration, gross drug costs of TOAMs increased at 11% per year, reaching $7,704 (median $7,636) PPPM in 2012. Among pts who did not receive subsidies from Medicare or other public insurance, OOP costs exhibited a non-linear pattern (Table), with the dip in 2011 corresponding to the starting year of ‘donut hole’ closing. Gross drug costs PPPM varied widely by medication, ranging from $4,100 to > $11,000 in 2012 (not shown in Table). Conclusions: The growth of TOAM costs in Medicare Part D program outpaced the growth of prescription drug CPI more than threefold. Rising drug costs of TOAMs not only impose a substantial fiscal burden on the Medicare Part D program, but also threaten the financial relief that the Affordable Care Act intended to achieve for pts by gradually closing the donut hole.