OBJECTIVES: Third-generation aromatase inhibitors are considered as first-line therapies for the treatment of advanced estrogen receptor (ER) positive, human epidermal growth factor receptor (HER) 2-negative breast cancer.  Palbociclib has been recently granted accelerated approval by the US FDA for use in combination with letrozole to treat ER-positive, HER2-negative advanced breast cancer in postmenopausal women.  The purpose of this study was to determine the cost-effectiveness (C/E) of the newly approved drug therapy and compare its cost-effectiveness with the established oral aromatase inhibitors (anastrozole and letrozole) that are prescribed for the same indication. METHODS: A Markov disease-state transition model was designed to compare the cost-effectiveness of the three treatment regimens – anastrole, letrozole, and combination therapy of letrozole and palbociclib.  The analysis was carried out from a third-party payer perspective.  The disease state transition probabilities were obtained based on published clinical trials. Drug acquisition costs were computed based on average whole sale price in the US; health utilities and costs for chemotherapy and palliative care were obtained from literature.  All costs were converted to 2014 US dollars.  A discounting rate of 5% was employed in the study.  TreeAge Pro 2015 was used for the model. RESULTS: Anastrozole had a C/E value of 14226.94, which was slightly lower than that of letrozole, 14545.26.  Combination therapy of palbociclib with letrozole fetched a C/E value of 111791.95.  As compared with anastrozole, the incremental cost-effectiveness ratio (ICER) of letrozole and palbociclib-letrozole therapy was 21824.34 and 510356.50 respectively. Sensitivity analyses found anastrozole to be less C/E than letrozole at higher costs and letrozole to be more C/E than anastrozole at lower costs of the drug.  CONCLUSIONS: The newly-approved combination therapy of letrozole and palbociclib was least cost-effective among all drug treatments under consideration.  This can be attributed to the higher acquisition cost of palbociclib.