OBJECTIVES: The clinical efficacy of laquinimod in relapsing remitting multiple sclerosis (RRMS) has been assessed in the randomized phase III clinical studies ALLEGRO and BRAVO. In these studies, laquinimod showed a reduction in disability progression measured by Expanded Disability Status Scale (EDSS) by 35.9% and 33.5% respectively, and a reduction in annualized relapse rate (ARR) by 23.0% and 21.3% respectively; all compared to placebo. In BRAVO a parallel group of patients received interferon beta-1a IM which showed a 28.7% reduction in EDSS progression and 28.6% reduction in ARR. The purpose of this analysis was to investigate health economic implications of these efficacy results. METHODS: A Markov model was developed to estimate costs and health effects in the treatment of RRMS with laquinimod, placebo and interferon beta-1a IM from a societal perspective in Sweden. The model included 10 health states defined by EDSS levels and used on-treatment efficacy data from the pooled ALLEGRO and BRAVO trials. Off-treatment efficacy data as well as costs and quality of life data for Sweden were taken from published articles. The analysis did not include pharmaceutical costs. Costs and health effects were discounted at a rate of 3.0%. RESULTS: Therapy with laquinimod during 5 years and a total time horizon of 40 years resulted in a gain of 0.21 quality adjusted life years and societal cost savings of €28 000 (0.1115 €/SEK) compared to placebo. The corresponding figures for interferon beta-1a were 0.09 quality-adjusted life years and €13 000. The results were stable for reasonable variation of most parameters. In particular, sensitivity analyses showed that EDSS progression was a much stronger driver of results than ARR. CONCLUSIONS: Laquinimod is associated with better health effects and lower overall non-pharmaceutical management costs than placebo as well as interferon beta-1a IM due to its favorable effect on EDSS progression.