OBJECTIVES: To evaluate the cost-effectiveness of pembrolizumab versus ipilimumab in patients with advanced melanoma who are previously untreated with ipilimumab from US Medicare perspective. METHODS: A partitioned-survival model was developed, which partitioned the overall survival (OS) time into progression-free survival (PFS) and post-progression (post-PD) survival. Time horizon for the base-case was 20 years. Costs and health outcomes were discounted at a rate of 3% per year.  Clinical data, including quality of life data from an interim analysis (cut-off date: March 3, 2015) of a randomized phase 3 study, KEYNOTE-006, comparing pembrolizumab and ipilimumab, and cost data from public sources were used to populate the model.  The model used Kaplan Meier estimates of PFS and OS from the trial with extrapolation based on parametric functions and literature data.  Cost data include drug acquisition, treatment administration, adverse event management, and clinical management of advanced melanoma.  Incremental cost effectiveness ratio (ICER) expressed as cost per quality-adjusted life years (QALYs) was derived as the main outcome.   A series of one-way and probabilistic sensitivity analyses was performed to test the robustness of the result. RESULTS: Pembrolizumab is projected to increase the life expectancy of US advanced melanoma patients by 1.42 years, corresponding to a gain of 1.20 QALYs over ipilimumab (undiscounted). The model predicts an increase of $68,862 in the average per-patient direct cost of treatment with pembrolizumab versus ipilimumab (discounted). The discounted ICER gained was $71,417/QALY over a 20-year time horizon.  With $100,000/QALY as the threshold, the base-case result is cost-effective.  When input parameters are varied in the one-way sensitivity analyses, the results are cost-effective in all scenarios.  Probabilisticsensitivity analyses show that the ICER is cost-effective in 99% of the simulations. CONCLUSIONS: Compared to ipilimumab, pembrolizumab improves QALYs and is cost-effective for the treatment of patients with advanced melanoma in the US.