OBJECTIVES: To evaluate the cost effectiveness of entecavir in reducing HBV DNA viral load(VL) and subsequent compensated cirrhosis(CC), decompensated cirrhosis (DC), and hepatocellular cancer(HCC). METHODS: The analytic perspective was that of a third-party payer. We used patient-level drug exposure and VL data from a randomized phase III trial of 715 HBeAg+ CHB patients, and estimates of cost offsets and life expectancy gains as a result of the prevention of projected clinical events. The multivariate-adjusted relative risks with VL categories were estimated by Cox proportional hazards models from a Taiwan cohort of 3,851 CHB subjects with 42,115 person-years of follow-up, and then applied to the trial patients whose VL were measured at Week 48 to estimate event risks. Entecavir and lamivudine were assigned daily prices of $19.43 and $6.14 respectively, based on recent First Data-Bank reports. Life expectancy for DC and HCC was estimated by the declining exponential approximation of life expectancy (DEALE) method. Other model parameter values were derived from external sources. The uncertainty surrounding event distribution and treatment failure rates beyond trial period were considered using probabilistic sensitivity analyses (PSA) with 1000 replicates. RESULTS: Subjects were male (75%), Asian (57%) or white (40%) with mean age 35 years. Entecavir was superior to lamivudine for the proportion of subjects who achieved HBV DNA<300 copies/ml by PCR assay at Week 48 (67% versus 37% , respectively) (P<0.05). One year of entecavir therapy gained 0.7843 quality-adjusted life year (QALY) at an incremental cost of $1607, with a 3% annual discount. Compared with lamivudine, using entecavir cost an incremental $2,049 per QALY gained (95%CI: $688, $5134), with 98.8% of PSA-derived estimates below $10,000/QALY. Results are robust and most sensitive to treatment duration, efficacy, and cost. CONCLUSIONS: Entecavir given for one year is clinically effective and highly cost-effective in HBeAg+ patients.