OBJECTIVES: Many studies have shown that insulin glargine (IG) is associated with a better glycemic control and less incidents of hypoglycemia. The objective of this study is to examine the potential cost avoidance arising from reduced hypoglycemic episodes by IG vs NPH insulin in T2DM patients receiving insulin in Hong Kong. The findings will fill a knowledge gap as no data is available before. METHODS: A decision analytic model was developed using local and international data to evaluate the potential health and economic impact of routine use of IG over a 1-year horizon. The study was conducted from a payer perspective. Probability of IG and NPH causing severe hypoglycemia was derived from the LEAD (LANTUS Evaluation in Asian Diabetics) study. Disease epidemiology and costs were all Hong Kong-specific. One-way sensitivity analysis was performed to test the robustness of model assumptions. RESULTS: The use of IG over a 1-year period is estimated to result in a substantial 81.9% reduction of hospitalization cost (HKD313,572,521) and a 29% reduction of emergency room cost (HKD1,184,312) which together accounts for about 0.7% of the overall annual public hospital budget of HK. In addition, IG is expected to prevent 23,755 cases of severe hypoglycemia events and to avert 95,022 hospitalization-days over 1 year. The overall incremental cost using IG vs. NPH is HKD126,843,257. CONCLUSIONS: The use of IG in T2DM patients receiving insulin in Hong Kong is likely to substantially reduce healthcare costs in hospitalization and emergency room visits due to severe hypoglycemia compared with NPH. The results of this study are considered as conservative because if improvement in clinical outcomes of IG over NPH is included, the additional clinical benefit will translate into larger long term health savings.