OBJECTIVES: To estimate clinical and economic outcomes 5 years after initiating add-on insulin detemir (IDet) or neutral protamine Hagedorn insulin (NPH) therapy among type 2 diabetes patients taking metformin ± glimepiride. METHODS: Baseline characteristics and treatment effect data were taken from a multicenter, 26-week, randomized controlled trial among insulin naïve type 2 subjects (mean HbA1c: 8.56 %; age: 60.8 years). Reductions in HbA1c were similar, though statistically significant improvements in body weight (1.6 kg difference; p<0.001) and reduction of intra-day variation of fasting plasma glucose (p<0.008) favoring IDet were observed. Additionally, risk of all hypoglycemia with IDet was 47% lower (p<0.001), and risk of nocturnal hypoglycemia was 55% lower (p<0.001). A published and validated computer simulation model of type 2 diabetes was used to project differences in quality-adjusted life expectancy (QALE) and direct medical costs (pharmacy plus complication costs) over a 5 year time horizon. Costs were taken from published sources in the US. Clinical outcomes and costs were discounted at 3% annually. Sensitivity analyses were performed. RESULTS: Initiation of IDet therapy was projected to improve QALE by 0.17±0.09 QALYs versus NPH after 5 years. Treatment with IDet was associated with slight reductions in the relative risk for major diabetes-related comorbidities. Direct medical costs were higher in the IDet treatment group than in the NPH group, leading to an ICER of $25,368 per QALY gained. Acceptability curve analysis indicated that there was a 94% probability of IDet being cost-effective versus NPH with a willingness to pay threshold of $50,000 per QALY gained. The results were most sensitive to variation in hypoglycemic event rates. CONCLUSION: Among insulin-naïve type 2 patients, initiation of IDet was estimated to improve quality-adjusted life expectancy and would be considered good value for money by commonly accepted standards in comparison to NPH.