OBJECTIVES:   Thalidomide (Thalidomide Pharmion® brand drug) combined with melphalan (M) and prednisone (P; MPT) increases progression-free survival (PFS) and overall survival (OS) compared to MP. We estimated life-time health and cost consequences of MPT versus MP in Welsh patients with untreated multiple myeloma. METHODS: A Markov model with 4 health states: PFS with adverse event, PFS without adverse event, progressed, and dead. Transition probabilities and discontinuation were derived from a clinical trial. Within the trial, subjects remained on treatment for up to 12 6-week cycles or until progression or treatment-limiting toxicity. Treatment duration and average dose were modelled to match the trial.  Thromboprophylaxis with MPT was included. Utilities associated with adverse events and disease states were obtained from the literature. Disease-management costs reflect clinical practice in Wales. Costs and outcomes were discounted at 3.5% per annum. RESULTS: The model estimated 25 months PFS with MPT versus 12 months with MP, with OS of 4.03 for MPT versus 2.88 years with MP; a gain of 0.9 (3.22 vs. 2.32) QALYs. MPT’s higher lifetime costs (£16,937 vs. £1,524), lead to an ICER of £17,002 per QALY gained and £13,346 per life-year gained. Probabilistic sensitivity analyses showed that the results remained consistent through changes in model parameters as 95% of model replications produced costs between 12,750 and 26,500 per QALY gained. CONCLUSIONS: Replacing MP with MPT is a cost-effective strategy, which can deliver substantial improvements in PFS and OS in a life-limiting orphan disease in Wales.