OBJECTIVES: The primary core analysis of the BIG 1-98 study showed that in postmenopausal women with hormone receptor positive (HR+) early breast cancer, the aromatase inhibitor (AI) letrozole (LET) significantly reduced the risk of recurrence by 19% overall (95% CI 7-30%) and the risk of relapse in distant sites by 27% overall (CI 12-40%) compared with tamoxifen (TAM). Letrozole demonstrated non-significant improvements in overall survival and contralateral breast cancer. LET patients had reduced risks of endometrial cancer and venous thromboembolism (VTE), but increased risks of mild/moderate hypercholesteraemia, cardiac events and fractures. This study reports the cost-effectiveness of initial adjuvant therapy with LET vs TAM in postmenopausal women with HR+ early stage breast cancer from the UK NHS perspective based on preliminary analyses of published results of the BIG 1-98 trial. METHODS: A Markov model describes the occurrence of contralateral tumours; locoregional recurrence; soft tissue, bone, and visceral metastases, and treatment side effects (endometrial cancer, VTE, hip fractures, other fractures, hypercholesterolaemia, and MI). Clinical parameters for TAM were based on published results of the BIG 1-98 trial and other published studies, as were health-state utilities. Corresponding probabilities for LET were calculated by applying RRs for LET vs TAM from the BIG 1-98 study. Costs of breast-cancer care were estimated using UK patient-level resource use data. Lifetime costs (2004UK£) and QALYs were estimated for HR+ women aged 61 years at diagnosis, discounted at 3.5% annually. RESULTS: Compared with TAM, LET results in an additional 0.33 QALYs (12.84 vs 12.51). These benefits are obtained at an additional cost of £4,079 (£12,474 vs £8,395). Cost-effectiveness of LET vs TAM is £12,321 (95% CI £2,672-£23,889) per QALY saved. CONCLUSION: Adjuvant treatment with letrozole is cost-effective from a UK NHS perspective compared with tamoxifen and should be considered in women diagnosed with HR+ early breast cancer.