OBJECTIVES: This study evaluates the cost-effectiveness and the budget impact of ixabepilone, a new microtubule stabilizer for treatment of breast cancer, as part of the Formulary Management System at a major tertiary cancer center in the United States. METHODS: A decision analytical model was developed to estimate the incremental cost-effectiveness of ixabepilone for breast cancer, in patients who failed treatment with anthracycline and taxane. The model compared two strategies: combination therapy of ixabepilone with capecitabine compared to capecitabine alone. The outcome of interest was progression free life year (PFLY), based on published literature and clinical use estimates.  Direct institutional medical costs for a one-year time period were utilized.  One-way and two-way sensitivity analyses on the probabilities of disease progression were conducted.  In addition, a budget impact analysis was also conducted for adding ixabepilone in the Formulary.  RESULTS: Based on outcome estimates from literature and the application of the institutional costs, the cost per PFLY saved for ixabepilone for treatment of advanced breast cancer was $318,404.  One-way sensitivity analysis on the efficacy probability (0-1.0) of the combination therapy indicated that ixabepilone’s cost-effectiveness ratios ranged from $205,000 to $1,190,000 per PFLY saved.  Two-way sensitivity analysis with a willingness-to-pay threshold of $250,000 indicated that the majority of the time monotherapy is the more cost-effective option. Only if the probability of response to the combination is >30% and the probability of response to the monotherapy is <33%, does the combination therapy become more cost-effective.  The budget impact model showed that the institution will utilize about $7.39 million worth of ixabepilone annually based on acquisition costs.  CONCLUSIONS: Ixabepilone appears to be less cost-effective than other neoplastic agents for treatment of breast cancer.  Future economic analyses will be conducted to determine how closely the current economic model predicts  actual utilization and cost-effectiveness at the institution.