OBJECTIVES: Although much information has been published on St. John's Wort, the question of cost-effectiveness remains to be addressed. The objective of this study was to determine the cost-effectiveness of St. John's Wort compared to fluoxetine from a third party perspective for the treatment of mild to moderate depression. METHODS: An expert panel of two psychiatrists, one pharmacist, and three primary care physicians was surveyed to establish a decision analytic model of depression management in the outpatient setting over a treatment period of one year. Treatment with fluoxetine 20 mg daily was compared to treatment with St. John's Wort 300 mg thrice daily for patients diagnosed with mild to moderate depression. Probabilities of the various outcomes included in the decision tree were obtained from a Medline search as well as the survey of the expert panel. Direct medical costs of physician and psychologist visits and lab tests were obtained from medical offices in the Connecticut area. Cost of fluoxetine and the herb were based on 2002 published data. The cost per successfully treated patient was evaluated for both therapies. One-way and multi-way sensitivity analyses were performed to determine the robustness of the data. RESULTS: The base case analysis yielded a cost-effectiveness ratio of $1788 per successful treatment with St. John's Wort compared to $2043 per successful treatment with fluoxetine. The results remained relatively robust to fluctuations in values of all variables. However, cost of therapy proved to be an important determinant in overall cost-effectiveness. At a cost of $20.00 per month, fluoxetine becomes the more cost-effective agent when St. John's Wort remains above $16.00 per month. CONCLUSIONS: St. John's Wort is a viable option for patients with mild to moderate depression in terms of both efficacy and cost. Consideration should be given for addition to third party payers' formularies.