OBJECTIVES: To estimate short-term cost-effectiveness of insulin detemir versus Neutral Protamine Hagedorn (NPH) insulin based on incidence of self-treated hypoglycaemia and body-weight gain in insulin-naïve subjects with type 2 diabetes in Sweden. METHODS: A short-term (one year) cost-effectiveness model was developed in Microsoft Excel® 2003. Hypoglycaemia incidence rates were based on UKHSG data. Relative risk (RR) of hypoglycaemia, weight change and insulin doses were obtained from randomized clinical trial data. Resource use (health care contacts, blood glucose tests) and sick-leave following hypoglycaemia were estimated from survey data. Effectiveness was expressed as quality adjusted life-years (QALYs). Direct and indirect costs were in Swedish Kronor (SEK 1 ≈ €0.10, 2010 values) with unit costs from official sources. Probabilistic sensitivity analyses were performed. RESULTS: Treatment with detemir was associated with fewer self-treated hypoglycaemic events compared with NPH (RR: 0.47 [CI 0.25:0.88]) and lower weight gain (mean difference -0.91 kg [CI -1.53;-0.28]), leading to an average gain of 0.011 QALYs per year. Annual costs were SEK6,505 for detemir versus SEK5,008 for NPH with an incremental cost-effectiveness ratio (ICER) of SEK139,665 per QALY gained for detemir versus NPH from a societal perspective. From a health care perspective, annual costs were SEK5,809 for detemir and SEK3,527 for NPH with an ICER of SEK212,909 per QALY gained for detemir versus NPH. CONCLUSIONS: Insulin detemir can be considered cost-effective versus NPH insulin in insulin-naïve subjects with type 2 diabetes in Sweden already in the first year of treatment, both from a health care and a societal perspective, based on reductions in self-treated hypoglycemia and superior weight management. Given the non-significant differences in HbA1c control, results of the short-term analyses is not expected to deviate substantially if longer time horizons are applied. Higher pharmacy costs with insulin detemir should not be a barrier to therapy based on these findings.