OBJECTIVES: Nearly 350 million people worldwide are chronically infected with hepatitis B virus (HBV). In the United States (US), the incidence of infection was estimated at 240,000 new infections annually between 1988 and 1994. Complications of HBV infection, such as cirrhosis, liver failure and hepatocellular carcinoma, are the cause of significant morbidity and mortality and may have important economic implications. As part of a multinational effort to examine the burden of HBV infection, our objective was to estimate direct medical costs in the US of six health states associated with HBV infection. METHODS: We used administrative claims data (including medical and pharmacy utilization) from a national database (PharMetrics) to estimate costs for: 1) chronic HBV; 2) compensated cirrhosis; 3) decompensated cirrhosis; 4) liver transplantation; 5) transplant care >12 months following transplant; and 6) hepatocellular carcinoma. Patients with HBV were identified in each health state using diagnostic and procedure codes specific to the health state, and their utilization was tracked during their time in that health state. To estimate costs, we used reimbursed (paid) amounts and adjusted to 2000 US dollars. RESULTS: Average annual costs for patients in each health state were: chronic HBV=$873; compensated cirrhosis=$305; decompensated cirrhosis=$15,102; liver transplant=$126,278; transplant care >12 months following transplant=$15,660; and hepatocellular carcinoma=$9478. Medications contributed the largest proportion of costs in chronic HBV and compensated cirrhosis, while hospitalizations were the largest cost component in the other health states. CONCLUSIONS: Our analysis provides estimates of the annual costs of complications of HBV infection in the US and suggests the costs of certain HBV sequelae are significant. The cost estimates can be used in modeling studies, which estimate the burden of illness of HBV and evaluate the cost-effectiveness of interventions targeted at HBV.