OBJECTIVES: To carry out a cost-utility analysis comparing initial treatment with solifenacin 5 mg/day versus oxybutynin immediate-release (IR) 15 mg/day for the treatment of patients with overactive bladder (OAB) from the perspective of the UK National Health Service (NHS). METHODS: A Markov model with six health states was developed in EXCEL to follow a cohort of OAB patients treated with either solifenacin or oxybutynin during a one year period. Costs and utilities were accumulated as patients transited through the health states in the model including a drop-out state. Some of the solifenacin patients were titrated from 5mg to 10mg/day at 8 weeks. A proportion of drop-out patients were assumed to continue treatment with tolterodine ER. Utility values were obtained from a Swedish study and pad use was based on a multinational clinical trial. Adherence rates for individual treatments were derived from a UK database study. For pad use and utility values, the drop-out state was split between those patients who were no longer receiving treatment and those on second-line therapy. Patients on second-line therapy who drop-out were referred for a specialist visit. Results were expressed in terms of incremental cost-utility ratios. RESULTS: Total annual costs for solifenacin and oxybutynin were £504.30 and £414.10 respectively. First-line drug use represents 49% and 16% of costs and pad use represent 23% and 35% of costs for solifenacin and oxybutynin respectively. Differences between cumulative utilities were small but were greater for solifenacin (0.7020 vs. 0.6907). The baseline incremental cost-effectiveness ratio was £7,921/QALY. CONCLUSIONS: Under our baseline assumptions, solifenacin is  cost-effective with an incremental cost-utility of less than £20,000/QALY. However, small differences in utility between the alternatives and the large number of drop-outs means that the results are sensitive to small adjustments in the values of utilities assigned to the drop-out state.