OBJECTIVES Type 2 diabetes is a chronic illness that affects more than 17 million Americans, leading to early death as well as to reduced quality of life due to complications such as blindness, renal failure etc. This study was undertaken with the aim of estimating cost-effectiveness of the premix analog insulin, biphasic insulin aspart 30 (BIAsp), when switched from biphasic human insulin (BHI). METHODS The well validated CORE Diabetes Model was used to project the clinical outcomes based on short-term data (26 weeks) from a Canadian subset of the IMPROVE™ observational study. The cohort (n=310) had a mean age of 64.2±10.96 years and 61.7% are male. In the IMRPOVE™ study, patients were switched from BHI to BIAsp and the main results included a reduction of HbA1c from 8.42±1.61% to 7.84±1.46%, an increase in BMI of 0.28±2.33 kg/m2 and a reduction in major and minor hypoglycemic events by 75% and 33%, respectively. Total direct medical costs (complications + treatment costs) were projected, using US unit costs, over patient lifetimes, and future costs and clinical benefits discounted at 3% per annum. RESULTS The short-term benefits of switching from BHI to BIasp are projected to lead to an increase in discounted quality-adjusted life expectancy of 0.276 years (4.289±0.094 versus 4.013±0.098). Increased total lifetime costs/patient is $4,936 ($84,776±2,423 versus $79,840±2,545) with BIasp. Combining costs and clinical outcomes result in an incremental cost-effectiveness ratio of $17,859 per quality-adjusted life year (QALYs) gained. CONCLUSIONS Higher acquisition costs of BIasp are projected to be partly offset by reduced later diabetes-related complications. The net life time cost increase is greatly justified by improved outcomes. The incremental cost-effectiveness ratio is well within what is normally considered good value for money in the United States.