OBJECTIVES: We developed a cost-effectiveness model of biological therapy (BT) compared with methotrexate (MTX) alone, using a combination of information from 150 patients at Hospital Militar in Bogota, Colombia, and from international trials and economic aggregated data. METHODS: We designed a Markov model with five functional states, based on Health Assessment Questionnaire (HAQ). Five simulations were estimated through hypothetical cohorts of patients, with similar characteristics to our observed sample, who initiated treatment in each of the five states defined for the disease. Simulations were run for 10 and 20 years under different scenarios. Utilities, in QALY were taken from Tufts CEA Registry. Discount rates: 6% for costs and 1.5% for utilities. We calculated both direct and indirect costs, converted into US dollars.  RESULTS: In the ten-year base case,  incremental cost effectiveness ratios (ICER) (in US$ per additional QALY gained) for each of the five functional states in increasing severity order, were $153,184; $139,466; $130,281; $134,752 and $109,934,respectively. In the twenty-year base case, ICERs were $119,025; $112,921; $108,124; $110,520 and $98,119, respectively. Total costs were lower with MTX, despite higher indirect costs and complication costs. However, BT treatment represented more QALYs regardless of the initial state. Moreover, it is more cost-effective to start the treatment from advanced disease states. BT would not be cost-effective in Colombia when using WHO cost-effectiveness threshold (3 times per capita GDP of US$6200) and even less so using other thresholds (US$ 50,000; €50,000 or £30,000 per QALY gained). CONCLUSIONS: BT compared to MTX provides more QALYs to the patients, but at a high cost. When ICERs were estimated for Colombia, BT would not be cost effective under usual thresholds. A serious dilemma arises. We suggest establishing different thresholds for different conditions, giving priority to chronic diseases that can lead to serious disability.