OBJECTIVES: The cost-effectiveness of adding thiazolidinediones (TZDs), rosiglitazone or pioglitazone, to metformin in treating type-2 diabetes mellitus was assessed from a Taiwanese national health insurance perspective. METHODS: This analysis was based on patient-level data extracted from the 2000-2005 Taiwan's National Health Insurance (NHI) databases.   Type 2 diabetic patients who had their first ambulatory visits with a diagnosis of diabetes mellitus and had received consecutive metformin treatments between 2001 and 2005 were identified.  Clinical effectiveness, a proxy of glycemic control (time to insulin dependence), and direct medical cost also were estimated from the NHI databases. Incremental cost-effectiveness ratio (ICER) was calculated and expressed as cost per delayed year to insulin dependence.  RESULTS: The use of TZDs as add-on therapy compared non-TZDs add-on therapy was associated with a delay in time to insulin dependence, rosiglitazone was associated with an additional 151 days (0.41 years) and pioglitazone was associated with an additional 101 days (0.28 years) of delay in insulin dependence. During the follow-up period, total mean medical costs were higher in patients who received an add-on rosiglitazone (New Taiwan dollars (NT) 153,162) or pioglitazone (NT 139,931) compared to add-on non-TZDs (NT 113,492) and the additional medical costs were driven primarily by diabetic medication cost and outpatient visit costs.  Combining the cost and effectiveness results, the ICER showed that the additional total medical costs of add-on rosiglitazone or pioglitazone were comparable, with ICERs of 95,874 and 95,485 NT dollars per year delay in insulin dependence, respectively.  CONCLUSIONS: This analysis suggests that add-on rosiglitazone or pioglitazone improves glycemic control but also increases direct medical costs compared with add-on non-TZDs when used in type-2 diabetic patients.  In terms of the incremental medical costs associated with these clinical benefits, add-on rosiglitazone or pioglitazone are similar in the National Health Insurance system in Taiwan.