OBJECTIVE: To assess the development of costs for dementia in Germany until 2050 under different demographic scenarios and the possible impact of treatment interventions with acethylcholinesterase inhibitors from various perspectives. METHODS: A model to estimate cost differences in dementia treatment with acethylcholinesterase inhibitors compared to a placebo scenario was developed. The model projects the number of dementia patients in Germany until 2050 under the assumption of extended life expectancy and immigration. Markov modelling allows to document the progression of dementia patients into more severe disease stages. Data of the population development are supplied by the Federal Bureau of Statistics and the German Institute for Economic Research. Number of patients are calculated from demographic prognoses considering prevalence of disease data from a published metaanalyses of the epidemiology of dementia. Data about transition probabilities between different disease stages are derived from a randomized clinical trial of an acethycholinesterase drug. Disease stage specific costs are taken from a cost of illness study previously published. RESULTS: The number of dementia patients will increase from 1 million to 2.5 million over the next 50 years in Germany. With treatment, there will be 30% less patients in the most severe, and hence most costly disease stage. Costs for treatment are offset by cost savings through a shift of patients to less severe disease stages, if indirect family and caring costs are considered. Reduction of direct costs due to treatment increase from €0.5 to €1.5 billion and indirect cost reductions are fourfold these figures. For 2000, net savings of €1.4 billion are demonstrated for the societal perspective. Results are stable for extensive sensitivity analysis. CONCLUSION: Results document that dementia treatment is economically attractive in an aging society.