OBJECTIVE: With improvements in therapy, HCV disease progression can be better controlled and a greater number of infected patients are able to remain in the workforce. This analysis quantifies the incremental direct (medical, drugs) and indirect (absenteeism, disability) costs of HCV from an employer's perspective. METHODS: Based on eligibility, medical, pharmacy and disability claims data from seven major US employers covering January 1, 1998 through June 30, 2001, we identified 833 HCV infected patients having at least 2 claims with a HCV ICD-9 diagnosis code less than 90 days apart, ribavirin and interferon combination therapy, a confirmatory HCV lab test followed by a HCV diagnosis, or a HCV diagnosis coupled with non-alcoholic cirrhosis, hepatocarcinoma, liver transplantation, or cryoglobulinemia. A 10% random sample of 148,166 uninfected individuals was chosen as controls. Employer costs resulted from direct medical costs and employee productivity loss. A tobit regression, which corrects for non-normality of costs, included controls for age, gender, health plan, location, alcohol abuse, HIV status, and illicit drug use. RESULTS: The unadjusted ratio of mean direct costs for HCV infected patients compared to uninfected patients was 7.9:1 ($857.4 vs. $108.1 per patient-month, p<.01). The ratio for indirect costs was 4.0:1 ($88.7 vs. $22.3 per patient-month, p<.01). After controlling for confounding factors, the ratios were 5.6:1 (95% CI: 5.6-5.7) for direct costs, and 8.1:1 (95% CI: 7.9-8.4) for indirect costs. Regressions on sub-categories yielded costs ratios for inpatient care, outpatient care, prescription drugs, absenteeism, and disability (short and long-term) of 5.3:1 (95% CI: 5.2-5.4), 5.0:1 (95% CI: 5.0-5.1), 7.5:1 (95% CI: 7.4-7.5), 5.5:1 (95% CI: 5.4-5.7), and 10.0:1 (95% CI: 9.2-10.8), respectively. CONCLUSION: Both the unadjusted and adjusted cost ratios for HCV infected patients compared to uninfected patients indicate that infection results in statistically significant increases in both direct and indirect costs to the employers.