OBJECTIVES: Sensor-augmented pump therapy (SAPT) demonstrated a significant reduction in HbA1c levels in type 1 diabetes patients compared to multiple daily injections of insulin (MDI) in a recent randomized trial. We analyzed the data on medical resource use collected within the trial and evaluated the long-term cost-effectiveness of SAPT versus MDI in adults with type 1 diabetes from the healthcare system perspective. METHODS:  We combined estimates derived from the trial data and the medical literature to populate the previously-validated CORE Diabetes Model, which includes a series of Markov constructs that simulate the progression of diabetes-related complications. During the 52-week trial period, SAPT patients were provided insulin pumps and 3-day sensors. Electronic records indicated that sensors were worn only by patients 65% of the time. The incremental reduction in mean glycated hemoglobin was 0.6 percentage points in patients randomized to SAPT relative to MDI. RESULTS: Among the 329 adults (19-70 years), mean age was 41 years and mean duration of diabetes was 20 years. Total treatment costs over the 52-week follow-up period were estimated at $10,760 for SAPT patients and $5,072 for MDI patients (2010 US$). Discounted (3% per year) lifetime estimates of direct medical costs and QALYs were $253,493 and 10.794 for SAPT patients and $167,170 and 10.418 for MDI patients. The corresponding ICER was $229,675 per QALY (95% CI: 139,071 to 720,865). Sensitivity analyses revealed that evolving technologies could improve the cost-effectiveness of SAPT. With a 6-day sensor, the ICER decreased to $168,104 per QALY. Upon development of a 6-day sensor that requires only one test strip per replacement for calibration, the ICER would drop to $72,417/QALY. CONCLUSIONS: Our base-case findings revealed that the current SAPT technology is not economically attractive. However, with technological advances currently in process, the cost-effectiveness of the SAPT could significantly improve.