OBJECTIVES: Few studies have examined the costs associated with differing first-line chemotherapy regimens in patients with breast cancer. In this study we compared the relative cost impact of women starting first-line chemotherapy with capecitabine versus taxane (paclitaxel or docetaxel).  METHODS: Women receiving first-line chemotherapy for metastatic breast cancer from 1998 to 2002 were identified from a hybrid NC Medicaid-claims - tumor registry linked database and Medicare records, and were followed through 2005 with claims data. T-tests, Chi-square,and Wilcoxon Rank Sum tests, where applicable, were used to compare baseline charactistics between patients who received first-line chemotherapy with capecitabine versus taxane (paclitaxel or docetaxel). Overall cost impact of capecitabine  was examined using a multivariate log-linear regression model with propensity scores and other time variant regressors to account for differences in the two groups of patients. RESULTS: A total of 733 patients (n=114 on capecitabine and n=619 on taxanes) starting these 2 first-line chemotherapies for breast cancer were identified using the linked database. While patients starting taxanes had significantly lower health care costs in the pre-index year than patients starting capecitabine (median costs: $19,490 for taxanes versus $14,315 for capecitabine, p<0.0001), in the post-index year, the patients on taxanes experienced significantly higher health care utilization and associated costs compared to patients on capecitabine (median = $17,792 for capecitabine vs $38,360 for taxanes, p<0.0001). The differences were primarily attributable to lower expenses in chemotherapy related claims and less visit days to outpatient settings for patients on capecitabine. After adjustment with propensity scores and other confounders, the capecitabine group was associated with 37.5% lower health care costs compared to the taxane group (p<0.0001).  CONCLUSIONS: In this population-based study, women who received capecitabine as first-line treatment for metastatic breast cancer had significantly lower costs compared to women starting taxane therapy.