OBJECTIVES: Although the WHO fracture risk assessment tool (FRAXTM) has been developed, its algorithm is unpublished and not necessarily available for economic evaluations. The purpose of this study was to develop a health economic model for assessing the cost-effectiveness of osteoporosis treatment in postmenopausal women with rheumatoid arthritis, who have received combination therapy including corticosteroids in Japan. METHODS: We constructed risk equations for age and bone mineral density (BMD)-specific fracture applying a series of methods proposed by De Laet CE et al (1997) to epidemiological data unique to Japanese. A state transition model with six health states (no fracture, post-vertebral fracture, post-hip fracture, post-vertebral and hip fracture, bedridden, and death) was developed to predict a ten year probability of hip fracture and the ten year probability of a major osteoporoetic fracture. Model validity was verified by comparison of the predicted fracture probabilities by different combination of age (55 to 65 years) and BMD (T-score -1.5 to -2.5) between the developed model and FRAX. RESULTS:  Individual simulation for 1,000 women aged 55, 60 and 65 years resulted in the expected life years of 31.3 to 32.3, 27.1 to 27.9 and 22.9 to 23.6, respectively, about the same as in national life table in Japan. The predicted probability of hip fracture in women with T-score -1.5, -2.0 and -2.5 were ranged to 0.8 to 1.4%, 1.4 to 2.5% and 2.9 to 5.1%, respectively, and consistent with those of FRAX as follows: 0.8 to 1.9%, 1.5 to 3.1% and 2.8 to 5.2%, respectively. As expected, our model had the tendency to slightly underestimate the probability of a major fracture because the model did not consider an occurrence of humerus fracture and wrist fracture. CONCLUSIONS: The model newly developed was validated and helpful for determining the cost-effective treatment thresholds for corticosteroid-induced osteoporosis in postmenopausal women with rheumatoid arthritis.