OBJECTIVES: To examine the economic impact of extended-release tolterodine (TOL-ER) versus immediate- (IR) or extended-release (ER) oxybutynin (OXY) in patients with overactive bladder (OAB). METHODS: This retrospective cohort study used the PharMetrics Patient-Centric Database to identify patients diagnosed with OAB who newly started therapy with TOL-ER, OXY-IR, or OXY-ER between January 2001 and December 2002. 12-month pretreatment and follow-up periods were established from the first prescription date. TOL-ER patients were matched to OXY-IR and OXY-ER patients based on an estimated propensity score for TOL-ER therapy (ie, probability of TOL-ER use based on multiple logistic regression). Use of OAB pharmaceuticals and related medications; use of outpatient and inpatient services related to OAB, infection, depression, and other conditions; and all corresponding costs were compiled for 1 year. Costs were compared using Wilcoxon rank-sum tests, and total healthcare costs were validated in a multivariate context using a generalized linear model. RESULTS: 7257 TOL-ER/OXY-ER (80% female) and 5936 TOL-ER/OXY-IR (72% female) matched pairs were created (mean age, 54 y). Because of matching, demographic and clinical characteristics between cohorts were not significantly different. Costs for services related to OAB, infection, and depression were significantly lower for TOL-ER vs OXY-ER. Total healthcare costs were also significantly reduced for TOL-ER (mean [SD], $8303 [$18,802]) vs OXY-ER ($8862 [$18,864], p=0.0109). Medication costs were significantly higher for TOL-ER ($2791 [$4997]) than for OXY-IR ($2204 [$3944], p<0.0001). However, this increase was offset by reductions in expenses related to conditions including infection and depression. Total costs did not differ significantly between TOL-ER and OXY-IR. After adjustment for between-group differences, costs were significantly reduced for TOL-ER patients versus OXY-ER and OXY-IR (p<0.01). CONCLUSION: Patients with OAB initiating therapy with TOL-ER incurred lower annual healthcare costs, including nonpharmacologic costs related to OAB, infection, and depression compared with those receiving OXY-IR or OXY-ER.