OBJECTIVES: To investigate potential drivers of costs and cost savings when assessing the budget impact of insulin administration devices (IADs) in patients with type 2 diabetes (T2D). METHODS: A Microsoft Excel®-based model was constructed to assess the budget impact of new reusable IADs in patients with T2D. The model captured costs of insulin, IADs, needles, self-monitoring of blood glucose (test strips and glucometers) and the direct medical costs of a number of diabetes complications (minor and major hypoglycemia, myocardial infarction, stroke, end-stage renal disease, blindness and amputation). Scenarios were constructed to assess the budget impact of changes in hypoglycemia rates, compliance and insulin wastage associated with a new IAD. The analyses were performed in a one million member US healthcare plan from the payer perspective. Future costs were discounted at 3% per annum and sensitivity analyses were performed. RESULTS: In a million member plan with a diabetes prevalence of 7.8% and annual diabetes incidence of 0.52%, a hypothetical IAD capable of reducing hypoglycemia rates or insulin wastage was projected to decrease healthcare expenditure over one and five-year time horizons. Conversely, a hypothetical IAD capable of improving compliance resulted in increased healthcare expenditure, driven by increased insulin and needle costs. A device that conferred all of these benefits simultaneously was found to be cost saving in the target population, resulting in a 0.62% decrease in diabetes-related healthcare expenditure over five years. CONCLUSIONS: An IAD capable of reducing hypoglycemic event rates and insulin wastage whilst improving compliance would likely be cost saving overall.