OBJECTIVES: Potentially inappropriate prescribing (PIP), the use of medications where the risks may outweigh the benefits, is prevalent in people aged ≥65 years. Only direct medication costs have been assessed to date, therefore, the aim of this study is to determine the economic impact of adverse effects associated with three common types of PIP (long-term use of non-steroidal anti-inflammatory drugs (NSAIDs), benzodiazepines, and proton pump inhibitors (PPIs) at maximal dose). METHODS:  Markov models were developed incorporating the adverse effects of each PIP (e.g. falls and fractures for benzodiazepines). Models were populated with published estimates of probabilities, Irish health system costs (in 2014 euro), and utilities and were run on a cohort of 65 year olds over 35 one-year cycles with discounting at 5%. Probabilistic sensitivity analysis estimated confidence intervals (CI) for cost and QALY differences between each PIP and an appropriate non-PIP alternative. The models were then used to evaluate the cost effectiveness of hypothetical interventions to reduce PIP. RESULTS:  The largest incremental cost and effect was for benzodiazepines compared to no pharmacotherapy (€3,470, 95%CI €2,434, €5,001; -0.07 QALYs, 95%CI -0.089, -0.047), followed by maximal dose PPIs relative to maintenance dose PPIs (€989, 95%CI -€69, €2,127; -0.01 QALYs, 95%CI -0.029, 0.003), and NSAIDs compared to paracetamol (€806, 95%CI €415, €1,346; -0.07 QALYs, 95%CI -0.131, -0.026). Considering prevalence and effectiveness of published interventions for each PIP, at a willingness-to-pay of €45,000/QALY, an intervention to reduce long-term NSAIDs would be cost effective up to the highest once-off intervention cost per person of €1,970. Interventions for inappropriate benzodiazepines and PPIs would be cost effective up to costs of €1,480 and €831 respectively. CONCLUSIONS:  Potentially inappropriate use of long-term benzodiazepines and NSAIDs were associated with significantly increased costs and reduced QALYs. Targeting inappropriate NSAID prescribing appears to be the most cost effective PIP intervention.