OBJECTIVES: To assess the cost-effectiveness of memantine, compared with standard care, in moderate to severe Alzheimer’s disease (AD) patients. METHODS: A cost-utility analysis was conducted based on a 3-state Markov model, which simulated 5-year evolution of pre Full-Time-Care (FTC) patients with and without memantine treatment in addition to any background AD therapy, in terms of time-to-FTC, Quality-Adjusted-Life-Years (QALYs), and cost. Transition from the pre-FTC to the FTC state was modelled using new predictive equations estimating time-to-FTC based on clinical assessment of cognition, function, and behaviour. The equations were derived from cohort of patients with dementia followed for four years. Treatment effect was estimated based on the published meta-analysis of six memantine RCTs. Both health utilities (EQ-5D) and resource utilization for the model came from a Scandinavian Study of Cost and Quality of Life in AD. Costs were valued from the societal perspective, and covered routine patient management, hospitalization, social community services, institutionalisation, medications, loss in productivity, and leisure time. Memantine cost was accounted for until patients required FTC (conservative). Costs and benefits were discounted at an annual rate of 3%. Results were reported in Euros (NOK), 2008. The model underwent extensive stochastic and one-way sensitivity analyses testing the impact of model assumptions and changes in input values for treatment effect, health utilities, cost, and discounting rates. RESULTS: Memantine was associated with a longer time-to-FTC of 21 days, QALYs gains of 0.02 and a cost saving of above €-900 (-7,500NOK). Lower costs in memantine group were due to prolonged pre-FTC time and offset drug acquisition cost. Memantine was cost-effective at €40,000 (300,000NOK) thresholds (72.86%). The sensitivity analyses confirmed the robustness of the base-case scenario. CONCLUSIONS: Memantine is associated with higher benefits for no additional costs relative to standard care, and is a cost-effective treatment.