OBJECTIVES: The aim of the analysis was to estimate the cost-effectiveness of human insulin treatment (current standard care) in patients with type 2 diabetes compared with biphasic insulin aspart (BIAsp) in those treated with insulin +/- OADs, from the perspective of third party payers in the South African private health care sector. METHODS: Clinical outcomes and baseline characteristics were taken from an observational study of 208 patients. A baseline mean HbA1c of 10.1% was recorded in patient whose average age was 52.8 years. The cost-effectiveness ratio was estimated as the incremental cost per life-year and quality-adjusted life-year gained of BIAsp treatment. Research was conducted to collect cost data in type 2 diabetics: resource utilisation, treatment costs, complication costs at year 1 and subsequent years were investigated using insurance data. Life-years gained were based on a 30-year follow-up using a published and validated Markov diabetes outcomes model, adjusted for South African risks and non-specific mortality. RESULTS: In the base-case analysis the BIAsp group had better clinical outcomes and lower lifetime costs. The estimated discounted gain in life-years of biphasic insulin aspart was 0.25 years, and 0.39 years with utility adjustment. The incremental cost per life-year gained and cost per-QALY were dominant. Total costs were 7% lower in the BIAsp group; treatment cost associated with BIAsp was 39% higher; cost savings were greatest in patients experiencing cardiovascular, renal or major hypoglycaemic complications. The acceptability curve showed a 99.8% probability that of biphasic insulin aspart is cost effective in the base case scenario at the WHO’s suggested threshold of three times GDP per capita. HbA1c effects were the most sensitive variable to final outcomes. In sensitivity analysis BIAsp remained dominant at half the study HbA1c effect. CONCLUSIONS: For patients with uncontrolled type 2 diabetes receiving current standard human insulin treatment, the use of BIAsp represents a cost-effective treatment.