OBJECTIVES: A new formulation of recombinant human bone morphogenetic protein-2 (rhBMP-2) on a Compression Resistant Matrix (CRM) evaluated in posterolateral spinal fusion (PLF) procedures for degenerative disc disease (DDD) has the potential to improve clinical outcomes and decrease costs. The rhBMP-2/CRM pivotal study demonstrated significant improvement in spinal fusion rates compared to procedures using iliac crest bone graft (ICBG), (Dimar 2009). This study evaluated the likely budget impact of rhBMP-2/CRM on U.S. payer costs compared to ICBG procedures in PLF. METHODS: A budget impact model was developed to quantify clinical and economic outcomes for patients with single-level symptomatic DDD and the U.S. payer costs of rhBMP-2/CRM in PLF procedures.  The model results compare use of rhBMP-2/CRM to the use of ICBG in these procedures. Both study arms use posterior supplemental fixation. The 24-month clinical data was derived from 463 patients in the rhBMP-2/CRM pivotal study trial and included independent radiographic assessment of fusion success rates, re-surgery rates, and complications rates (infections, bleeding, cardiovascular complications, GI complications). Payer costs and clinical practice data were derived from published sources and from the 2007 Medicare Inpatient Standard Analytic File and inflated to 2010 costs using the medical care component of the U.S. Consumer Price Index.  RESULTS: The average 2-year costs per patient treated with ICBG were $53,740.  Comparatively, treating patients with rhBMP-2/CRM is estimated to reduce average costs by 12% ($6,252) per patient. Cost reductions were primarily driven by a reduction in subsequent surgeries. Fusion rates at 2 years were greater in the rhBMP-2/CRM group compared to the ICBG group (96% vs. 89% at p=0.014).   CONCLUSIONS: This budget impact model based on RCT data demonstrates that the use of rhBMP-2/CRM in treatment of DDD patients undergoing PLF procedures is associated with substantial cost savings to payers when compared with traditional ICBG procedures.