OBJECTIVES: Heptatitis B is prevalent in South Korea and chronic hepatitis B (CHB) infection is an important public health issue due to its potential to evolve to cirrhosis, hepatocellular carcinoma. This study estimated the direct medical cost of CHB-related disease states in South Korea and compared the cost of South Korea with that of USA, Australia and China. It also aimed to analyze the impact of three therapeutic alternatives for CHB by Budget Impact Analysis (BIA). METHODS: Dynamic budget impact analysis was conducted based on a Markov model for 5 years. Three treatment scenarios were selected as follows: 1st line treatment of lamivudine, 2nd line combination treatment of lamivudine and adefovir on the development of drug resistance, 1st line treatment of lamivudine, 2nd line treatment of entecavir 1.0mg on the development of drug resistance, 1st line treatment of entecavir 0.5mg, 2nd line treatment of adefovir on the development of drug resistance, no treatment available. RESULTS: The BIA results of scenario A, B, C and no treatment were 75, 74.7, 85.9 and 48.1 billion Korean Won (KRW), respectively. The results were relatively insensitive to the TP and sensitive to the number of treated patients based on sensitivity analyses. The costs of annual direct medical costs in South Korea were 23.2% ~ 65.8%, 16.2% ~ 59.1% and 75.8% ~ 381.7% of the annual direct medical costs in US, Australia and China. CONCLUSIONS: Scenario C (1st line treatment of entecavir 0.5mg, 2nd line treatment of adefovir) was found to be 10.9 ~ 11.2 billion KRW more expensive than scenario A and B from payer’s perspective.  In South Korea, the direct medical costs of CHB-related diseases are cheaper than US and Australia. It suggests that such factors as the difference of GNP (Gross National Product), healthcare system and others contribute to the difference of the direct medical costs.