OBJECTIVE: To compare treatment costs and cost-effectiveness of telithromycin versus other commonly-prescribed therapies for community-acquired pneumonia (CAP). METHODS: We developed an economic model to estimate the costs of treating CAP using a utilization-based definition of therapy failure, defined as respiratory-related hospitalization, ER visit, receipt of second antibiotic, or >1 return office visits within 30 days of therapy initiation. Probability of failure was estimated for amoxicillin/clauvulanate, azithromycin, clarithromycin and fluoroquinolones from a longitudinal database; estimates were adjusted using propensity scores based on patient characteristics and prior utilization patterns. Probabilities for telithromycin were estimated using relative risks for each outcome versus clarithromycin from a published clinical trial. Costs of initial therapy and costs of failure were derived from the longitudinal database; probability of clinical cure was estimated from published clinical trials. The model was used to estimate 30-day direct treatment costs, and cost-effectiveness as incremental cost per clinical cure. We used second-order Monte Carlo simulation to evaluate the effect of uncertainty in key model parameters on our findings. RESULTS: In base-case analyses, telithromycin had the lowest overall treatment costs at $174/treated patient, followed by azithromycin ($219), clarithromycin ($262) fluoroquinolones ($315), and amoxicillin/clauvulanate ($340). Clarithromycin had a slightly higher probability of clinical cure (92.1%) than telithromycin (90.5%) but at an additional cost of $5444/cure. Fluoroquinolones had a slightly higher probability of clinical cure (92.3%) than clarithromycin at a cost of $24,098/cure. Azithromycin and amoxicillin/clauvulanate were dominated. Alternative analyses using AWP and WAC to estimate drug costs yielded similar results. Probabilistic sensitivity analyses showed telithromycin to be the least costly therapy in 88% of 1000 simulations. Telithromycin was cost-effective at a threshold of $500/cure in 86% of simulations, and at a threshold of $1000/cure in 83% of simulations. CONCLUSIONS: Telithromycin appears to be a cost-effective treatment for CAP versus amoxicillin/clauvulanate, azithromycin, clarithromycin and fluoroquinolones.