OBJECTIVES: We sought to determine, from the Australian health care perspective, the cost-effectiveness of the bisphosphonate risedronate, relative to placebo, in preventing vertebral fractures among patients with corticosteroid-induced osteoporosis. METHODS: A decision-analytic Markov model was developed to simulate the onset of vertebral fractures and death among Australian patients with corticosteroid-induced osteoporosis. Age-specific underlying incidences of vertebral fractures and death were estimated from published data. The costs (AUD $1393 in Year 1 and AUD $34 in subsequent years) and utility (0.71) associated with a vertebral fracture were also drawn from published sources, as was the efficacy of risedronate in reducing vertebral fracture risk (relative risk 0.43, 95%CI 0.20-0.92). The model adopted a life-time horizon and an annual discount rate of 5% was applied to both costs and years of life / QALYs lived. Multiple sensitivity analyses were undertaken with reasonable variations to key data inputs. RESULTS: The base-case incremental cost-effectiveness ratio (ICER) with a life-time horizon was AUD $18,085 per QALY saved. Estimated ICERs remained below AUD $40,000 per QALY saved throughout all sensitivity analyses, except when assuming the upper limit of the 95% confidence interval for risedronate’s efficacy in reducing vertebral fracture risk (AUD $53,130 per QALY saved). CONCLUSIONS: Risedronate represents a cost-effective option for preventing vertebral fractures in Australian patients with corticosteroid-induced osteoporosis. This was confirmed by the recent recommendation by the Australian Pharmaceutical Benefits Advisory Committee (PBAC) that risedronate be reimbursed for this indication.