OBJECTIVES: In Australia, hormone replacement therapy (HRT) is the standard therapy for reducing fracture risk in postmenopausal women with no previous fracture. Therapies like bisphosphonates, calcitriol and raloxifene are used in women with radiographically defined fracture resulting from minimal trauma. The results of the Women's Health Initiative study point to the need, however, to assess the cost-effectiveness of newer agents in preventing fracture in osteoporotic women without prior fracture. This study aimed to assess the cost-effectiveness of raloxifene in preventing osteoporotic fractures in such a population. METHODS: A Markov model was developed to compare raloxifene with HRT and with alendronate in osteoporotic women with no prior fracture. Relative efficacy assumptions in the model were based solely on the results of randomised controlled trials (MORE, FIT-II, WHI), while transition probabilities and downstream fracture effects were taken from a range of literature. Primary outcomes included vertebral fractures, non-vertebral fractures, breast cancer and cardiovascular disease in a cohort with a low bone mineral density and an average age of 65 years. The model contained 12 discrete states and yielded costs per quality-adjusted life-year (QALY). Limited memory was incorporated into the model by separating each fracture health state into two states, representing the first and subsequent years after fracture. The model ran for a 30-year period, but therapy was assumed to continue for only 5 years, after which transition probabilities reverted to values associated with no treatment. RESULTS: The incremental cost per QALY gained with raloxifene treatment compared with HRT in a population of osteoporotic women with no prior fracture was $14,506 (US$8,203). In the same population, raloxifene was found to be more effective and less expensive than alendronate. Extensive sensitivity analyses indicated these results were robust. CONCLUSION: Raloxifene is a cost-effective therapy to reduce fracture risk in postmenopausal osteoporotic women without prior fracture.