The novel incretin analogue, once-daily liraglutide, mimics the effect of endogenous glucagons-like peptide 1 (GLP-1).  Liraglutide was found to be significantly more effective than the DPP-4 inhibitor, sitagliptin (increasing the half-life of GLP-1 by inhibiting its degradation by DPP-4), in lowering HbA1c and weight in patients with T2DM (Pratley et al., 2010). OBJECTIVES: To compare, from a German payer’s (SHI) perspective, the long-term clinical and cost effectiveness of liraglutide (1.2mg or 1.8mg OD) versus sitagliptin (100mg OD), in combination with metformin, in T2DM patients, based on data from the randomized clinical trial (RCT) by Pratley et al., 2010. METHODS: RCT data were used to populate the CORE Diabetes Model (CDM), calibrated to clinical study baseline characteristics and background mortality in a German diabetes population.  Costing (direct costs only) was done from the SHI perspective for year 2009. A discounting rate of 3% was used for costs and clinical effects. For hypothetical cohorts of 1000 patients, each followed for 20 years, liraglutide or sitagliptin were assumed to be maintained for 5 years and patients to be subsequently switched to insulin.  Consequences (costs and effects) were projected over a 20-year time horizon.  RESULTS: Estimated 20-year survival rates were higher for liraglutide 1.8mg (41.1%) and 1.2mg (40.3%) compared to sitagliptin 100mg (39.5%), and cumulative costs were €47,436, €45,627, and €43,298, respectively.  Base case ICERs were €37,163 per life year gained for liraglutide 1.8mg (or €48703 for 1.2mg) versus sitagliptin, and €20,702 (or €20,870 for liraglutide 1.2mg) per QALY gained.  Sensitivity analyses, including longer time horizons, different risk (CDM base case, Framingham study, and UKPDS) cohorts, indicated robustness of findings. CONCLUSIONS: Long-term projections combining RCT data with the CDM indicate an acceptable to attractive cost effectiveness of liraglutide compared to sitagliptin (both plus metformin) according to currently prevailing standards.