OBJECTIVES: To estimate the cost-effectiveness of using the capsaicin patch QUTENZATM prior to use of more costly neuropathic pain medications for individuals with peripheral neuropathic pain (PnP). METHODS: A decision tree and Markov model was developed using inputs from a prospective, observational study. This study provided estimates of clinical efficacy, health utility and resource use. The model considered two treatment strategies: 1. a capsaicin patch followed by pregabalin and then a subsequent last-line therapy, and 2. no exposure to a capsaicin patch. A systematic review and meta-analysis were used to estimate the effectiveness of pregabalin. Response was defined as a ≥50% reduction in pain at week-8. Patients who responded were assumed to experience pain relief and increase in health-related quality of life until the resolution of pain (or death). Non-responders were assumed to switch therapy, and individual’s that failed last-line therapy were assumed to experience baseline pain (unless resolution of pain or death). Costs were based on published sources. The primary outcome was the incremental cost-effectiveness ratio (ICER). The perspective was the UK National Health Service and personal social services. RESULTS: Key parameter estimates derived from the observational study were: the probability of response for capsaicin patch (29.5%), the mean number of patches per application (1.5), the mean time to retreatment (218 days), The baseline EQ-5D score was 0.370; response was associated with an increase in EQ-5D utility of 0.353 from baseline. The base-case ICER was £2,292 per quality-adjusted life-year (QALY). This varied by time horizon. Probabilistic sensitivity analysis suggested that over a lifetime horizon, a treatment strategy placing capsaicin patches before pregabalin had a 99.9% probability of being cost effective at a willingness-to-pay threshold of £20,000. CONCLUSIONS: The capsaicin patch used before pregabalin was a highly cost-effective treatment in the management of peripheral neuropathic pain.