OBJECTIVES: Ribavirin-induced anemia is a common adverse effect of chronic hepatitis C treatment. Pilot studies have shown that the use of epoetin has decreased the need for ribavirin dose reduction or discontinuation. Our goal was to calculate the incremental cost-effectiveness of using epoetin to treat ribavirin-induced anemia, per ribavirin dose reduction or discontinuation averted. Our secondary aim was to calculate the incremental cost of hepatitis C treatment, comparing those who developed anemia to those who did not, using each of two strategies: ribavirin dose reduction/discontinuation or epoetin. METHODS: Using estimates from the literature and decision-analytic techniques, we modeled treatment patterns and estimated the cost of managing ribavirin-induced anemia. One-way sensitivity analyses were used to address uncertainty. RESULTS: Clinically significant anemia, defined as a 2g/dL or greater reduction in hemoglobin, developed in approximately 72% of patients in observational studies. The cost-effectiveness of using epoetin to treat ribavirin-induced anemia ranged from $39,579 (severe anemia, genotype-2/3) to $52,200 (moderate anemia, genotype-1), per ribavirin dose reduction/discontinuation averted. The incremental cost of treating hepatitis C, comparing patients with anemia to those without, using ribavirin dose reduction/discontinuation saved $2,742 (genotype-1) and $323 (genotype-2/3); when using epoetin; the additional cost was $2,075 and $5,501, for genotype-1 and genotype-2/3 patients, respectively. CONCLUSION: The incremental cost of treating ribavirin –induced anemia is minimal, and varies with the probability of developing anemia. However, once anemia has developed, the cost of using epoetin per ribavirin dose modification averted is substantial; and varies with the probability of response to epoetin. These findings suggest that additional studies are warranted that will define both genotype-specific strategies to treat ribavirin-induced anemia and the optimal use of epoeitin as adjunctive therapy in patients with chronic hepatitis C.