OBJECTIVES:  The FreeStyle Libre™ system is a novel, sensor-based, factory-calibrated flash monitoring system that continuously measures glucose levels in the interstitial fluid. Data is wirelessly transferred from the 14-day adhesive sensor to a handheld reader. A budget impact model (BIM) was created to assess the impact of introducing the flash monitoring system from a German healthcare perspective. METHODS:  The BIM was designed with a 3-year time horizon for patients with T2DM using intensive insulin. Budget impact of flash monitoring was compared with self-monitoring of blood glucose (SMBG) using inputs from a randomised controlled trial (the REPLACE study) for glucose monitoring, healthcare use following non-severe hypoglycaemia events, and all-cause resource utilisation. Resource utilisation included the cost of visits to the emergency room, ambulance call-outs and admissions to hospital. Sensor cash price was €59.90. RESULTS:  Estimated costs for flash monitoring system users PPPY are: glucose monitoring €1635, healthcare use following non-severe hypoglycaemia €104, and resource utilisation €472, for a total of €2210 PPPY. For SMBG users, the corresponding estimated costs are €576, based on 3 SMBG tests per patient per day observed in REPLACE, €143 and €1764, for a total of €2484 PPPY. Hence the overall PPPY costs for flash monitoring system users are estimated to be €274 (11%) less than for SMBG. Therefore although there are additional costs of glucose monitoring associated with the flash monitoring system, there may be an overall saving to the health system from cost offsets related to reductions in hypoglycaemia and healthcare utilisation. CONCLUSIONS:  Given the reduction in resource utilisation observed in the REPLACE study for patients using the flash monitoring system compared with SMBG, the system is considered to be affordable and potentially cost-saving to the German healthcare system.