OBJECTIVES: In China, 93 million people are chronically infected with hepatitis B virus, causing around 19,300 deaths annually. However, detailed costs of treating CHB have not been well studied, particularly within the growing urban areas. This study aimed to assess the annual direct medical costs for the management of CHB in three cities in China. METHODS: Medical claims of 8,954 urban CHB patients from Beijing, Nanjing, and Qingdao between January 2006 and December 2007 were randomly reviewed. Demographics; inpatient and outpatient costs; type of medications, including antiviral and Traditional Chinese Medicine [TCM], were all recorded and stratified by the stage of disease. RESULTS: Annual outpatient costs per patient were 694; 877; and US$1409 for Qingdao, Nanjing, and Beijing, respectively. Among outpatient expenses, western medications formed the bulk of these costs in Qingdao (58.9%) and Beijing (62.9%), but a lesser amount in Nanjing (46.9%). The use of antivirals is 20% in Nanjing and 37% in Qingdao of total western medications. TCM prescriptions for CHB varied across these different cities with the greatest usage in Nanjing (20.8%). For hospitalized patients, annual costs per patient were 1893; 2101, and US$2622 in Nanjing, Qingdao, and Beijing, respectively. The costs increased progressively in patients with compensated liver disease, (US$1983) decompensated liver disease (US$2802) and hepatocellular cancer (US$3019), respectively. Patients contributed around 50% towards outpatient costs and 30% towards inpatient care. CONCLUSIONS: CHB exerts a significant health and financial burden which progressively increases as patients progress from early to late stages of the disease. While antivirals are associated with a reduction in disease progression, their use remains relatively low in urban areas in China. Further work is required to determine whether an early treatment with effective CHB medications can reduce the overall financial burden within China.