OBJECTIVES: To assess the cost-effectiveness of treating, in an observational setting, first-line Chronic Lymphocytic Leukaemia (CLL) patients in the USA with Rituximab, Fludarabine and Cyclophosphamide (R-FC) versus FC alone (Tam et al., 2008). METHODS: A 3-state semi-Markov model was developed with rates of disease progression obtained from the Progression Free Survival curves (R-FC n=300; FC n=108, 6 year median follow-up) using the best fit (Weibull) function, and rates of death in the PFS and progressed states based on background mortality and observed CLL mortalities respectively. Published utility values of 0.8 and 0.6 were applied to PFS and progressed health states and no treatment benefit was assumed beyond the observational period.  Costs were estimated using Medicare reimbursed rates, MS-DRGs for CLL and published drug prices, and include the cost of administration and adverse events.  Costs (in USD) and quality-adjusted life-years (QALYs) were estimated over a lifetime horizon (30 years) and discounted at 3% per annum. RESULTS: Average lifetime health service costs per patient were $51,694, and $29,192 for R-FC and FC respectively. Life expectancy was estimated as 9.9 years for R-FC and 7.7 years for FC. Average QALYs for R-FC and FC were 7.3 and 5.5 years respectively. The incremental cost-effectiveness ratio for R-FC compared to FC was $10,291 per life year gained and $12,382 per QALY gained. The modeled results were robust to sensitivity analyses assessing the uncertainty about costs and efficacy.  CONCLUSIONS: In CLL patients, first-line treatment with R-FC in the observational setting significantly extends life expectancy and is a cost-effective alternative to FC.