OBJECTIVES: This study evaluates the clinical and economic benefits of routine infant vaccination with the 7-valent pneumococcal conjugate vaccine (Prevenar, PCV7) in Taiwan.    METHODS: A decision-analytic model was populated with local age-specific incidence and seroprevalence data obtained from the National Health Insurance database (NHI) and published literature to simulate the expected health outcomes resulting from universal PCV7 vaccination of an annual birth cohort of 204,000 children compared to an unvaccinated cohort over a ten-year horizon. Base case analyses were conducted from a payer perspective, with local direct costs associated with the treatment of pneumococcal disease derived from the NHI database (2002-2006). Vaccine efficacy rates for PCV7 were consistent with results from the Northern California Kaiser Permanente pivotal efficacy trial. The reduction in adult IPD cases and associated cost avoidance due to indirect (herd) protection was estimated in line with published overseas rates. One-way sensitivity analyses were performed to evaluate the sensitivity of the model findings to plausible variation in specific data inputs.RESULTS: In the birth cohort alone, universal PCV7 vaccination was estimated to prevent hundreds of IPD cases over a ten-year horizon, leading to a significant reduction in direct medical costs. Substantial cost savings were further generated when the impact of vaccination on all-cause pneumonia and otitis media was also considered. Indirect protection extended to the unvaccinated population led to a reduction of thousands of adult cases of IPD. From a payer perspective, universal PCV7 vaccination was estimated to have an incremental cost per life year gained of NT344,928 (US$11,227) in the base case. Outcomes generated in secondary analyses were equally cost-effective. CONCLUSIONS: With reference to the World Health Organization threshold for cost-effectiveness, results from this study indicate routine infant vaccination with PCV7 is a highly cost-effective intervention in Taiwan.