OBJECTIVES: To assess the cost–effectiveness of anastrozole (Arimidex™) as adjuvant treatment in postmenopausal hormone receptor positive (HR+) early breast cancer (EBC). METHODS: A Markov state transition model was created to simulate the natural history of postmenopausal HR+ EBC over 20 years. Adverse events and direct rates of disease progression were obtained from the 5–year analysis of the ATAC (Arimidex, Tamoxifen Alone or in Combination) trial (n=9,366). Progression to subsequent health states following initial disease progression was based on published clinical studies. Utility scores for different disease stages were obtained from published literature. Costs of breast cancer recurrence (locoregional and distant) were obtained from a retrospective chart review (1998) which was updated and validated by clinical expert opinion (2001). Costs were discounted at 3%/y. Base–case analysis considered Arimidex large pack price (€3.4286/day). RESULTS: Comparison with EBCTCG (Early Breast Cancer Trialists Collaborative Group) data shows that the model is valid for predicting clinical outcomes. At a life time horizon of 20 years, an incremental cost-effectiveness ratio (ICER) of 4,233€/life year gained (LYG) and 3,958€/QALY are obtained for anastrazole relative to tamoxifen. Conclusions were robust to variations in cost estimates of disease progression and of risk reduction by anastrozole with highest sensitivity to distant recurrence risk reduction. Outcomes were sensitive to the applied time horizon with an ICER of 8,474€/LYG and 7,581€/QALY at 15 years and 26,758€/LYG and 21,770€/QALY at 10 years. For the Arimidex small pack price (€4.5611/day), ICERs are higher but remain below 30,000€/LYG or QALY for a time horizon of at least 12 years. CONCLUSION: In adjuvant treatment ICERs are time horizon dependent due to different timings of treatment costs (initial 5 years) and benefits (decreased recurrence over several years). With tamoxifen as comparator, anastrozole is a cost-effective adjuvant treatment for postmenopausal HR+ EBC and lies within acceptable cost-effectiveness benchmarks.