OBJECTIVES: This study is to estimate potential cost savings by reducing the incidence of two major smoking-related illnesses - chronic obstructive pulmonary disease (COPD) and coronary heart disease (CHD) – through successful smoking cessation among insured Chinese population. METHODS: A predictive economic model was constructed upon a hypothetical cohort of insured patients to assess cost savings of an oral smoking cessation drug (varenicline) in terms of reduced COPD/CHD incidence over 15 years (at 5-year intervals). The size of the cohort was determined by COPD/CHD prevalence, COPD/CHD population attributable to smoking and percentage of patients insured drawn from public information and literature, and data of smokers’ willingness to use oral smoking cessation drugs obtained from internal market survey. Medical treatment costs of varenicline were estimated according to current pricing scheme. Cost-savings at different intervals were estimated using parameters of successful tobacco abstinence rate calculated from varenicline clinical trials, risk reduction of COPD/CHD drawn from literature, and annual management costs of COPD/CHD patients obtained from provincial health insurance database. Sensitivity analysis on tobacco abstinence rate in varenicline users was also performed. Overall cost-savings were then estimated combining medical treatment costs of varenicline and associated cost-savings together. Cost-savings due to reduced disease risk are calculated at each 5-year interval. RESULTS: A total of 19,583 subjects are included in our cohort. Costs of completed varenicline cycles are estimated to be RMB 42 million. At the first year, medical costs for varenicline outweigh the savings by around RMB 32 million. However, increased cost savings are observed at Year 5, 10 and 15, ranging from RMB 25-27 million, RMB 120-126 million, RMB 242-253 million, respectively. CONCLUSIONS: Successful smoking cessation through varenicline treatment could lower the burden of smoking-related illness in China, and its associated cost savings are substantial to the society in the long run.