OBJECTIVES: The aim of this economic evaluation was to test the hypothesis that the clinical benefits observed with pioglitazone in the PROactive Study will lead to economic benefits in terms of reduced macrovascular complications costs and insulin treatment in Italy (the trial compared standard of care + pioglitazone versus standard of care alone). METHODS: Two analyses were undertaken; within trial analysis and life-time simulation. The PROactive study provided the clinical and resource utilization data to estimate the cost-effectiveness of pioglitazone in the within trial analysis and was the basis for the secondary analysis which undertook a life time simulation using a modified version of the validated CORE diabetes model. CODE-II utility values were used for the base case. Due to the distribution system of pioglitazone in Italy, two different prices were used; the public price paid by the retail market (€2.11 per patient per day) and the ex-factory price discounted by 25% (€ 0.96 per patient per day).  Costs and health gains were discounted at the joint rate of 3%. RESULTS: The incremental utility gain in within trial analyses was 0.0191, the incremental event and medication costs in the public price scenario were €842 leading to an ICER of €43,996 per QALY. In the lifetime simulation model the incremental utility gain was 0.149, the incremental event and medication costs in the public price scenario were €3,783 leading to an ICER of €25,426 per QALY. In the ex-factory price discounted by 25% scenario the medication costs were lower leading to the inclusion of pioglitazone in treatment being dominant in both analyses. CONCLUSIONS: In the Italian setting reduced costs for macrovascular complications and insulin treatment leads to the inclusion of pioglitazone in treatment being within standard cost-utility thresholds and is therefore an effective use of health resources.