OBJECTIVES: A reimbursement process for targeted therapies was introduced in 2011 requiring joint economic assessment of both the new treatment and associated diagnostic test. Thus the emphasis of the evaluation was no longer simply on the effectiveness of the new treatment in targeted patients but also in patients inappropriately treated due to false positive test results. A submission for subsidy of EGFR mutation testing to determine eligibility for first-line gefitinib treatment of patients with advanced NSCLC was undertaken. METHODS:   An individual patient simulation was used to model current SOC for NSCLC, no test and first-line platinum-based doublet chemotherapy versus the proposed intervention, EGFR mutation test and gefitinib treatment for EGFR M+ patients and SOC for EGFR M- and EGFR unknown patients. The IPASS Study (NCT00322452) confirmed the benefit of TKIs in EGFR M+ patients, but also the potential harm to EGFR M- patients in the first-line setting. Data were thus available for EGFR M+ and EGFR M- patients treated with both gefitinib and SOC. This information was critical to development of a screening module and survival curves. RESULTS: EGFR testing regimens to target TKI treatment at various points in the patient’s life from diagnosis through to palliative care were compared. The results were most sensitive to choice of comparator such as: inclusion of switch maintenance following doublet chemotherapy; proportion of patients receiving second-line therapies including targeted TKI; and use of subsequent untargeted TKI. EGFR testing+gefitinib was a dominant economic strategy when compared to commonly used treatment alternatives. Assuming the most conservative comparator strategies, EGFR+gefitinib remained cost-effective. Decreasing the specificity of EGFR testing (false positive rate) or including a mortality benefit to TKI worsened the ICER. CONCLUSIONS: Simultaneous reimbursement of the EGFR test and gefitinib for first-line treatment of EGFR M+ aNSCLC was a cost-effective alternative to no testing and chemotherapy.