OBJECTIVE: Although efavirenz has demonstrated excellent efficacy in clinical trials and is less expensive than most regimens, a full understanding of its economic impact requires knowledge of the effect key parameters have on the economic situation. In this study, the costs of managing HIV+ treatment na ve patients with efavirenz compared to indinavir were evaluated. METHODS: A model was developed to simulate the disease progression of a population of HIV+ patients. Data from a clinical trial comparing two nucleoside reverse transcriptase inhibitors plus efavirenz to a similar regimen containing indinavir provided effectiveness inputs to the model. These data along with the likelihood of viral rebound over time were used to project the long-term effectiveness of initial treatment with these regimens. Cost estimates were developed from six all-payer state discharge databases, fee schedules, survey data and the literature for different disease states in the progression of HIV. Costs are reported in 1998 US dollars. RESULTS: Over the 24 week trial period, patients beginning treatment with an efavirenz regimen were predicted to cost $2,672 less than those started on an indinavir regimen. Efavirenz is forecast to maintain cost savings through year 6 ($11,015) given its intention-to-treat response rate of 75%. Only if this rate were 30% of the demonstrated rate would indinavir therapy be less expensive over the first 3 2 years following treatment initiation at which time efavirenz achieves cost savings. Other factors such as the cost of indinavir therapy will be discussed. CONCLUSIONS: The results of our model suggest that the health benefits associated with efavirenz treatment are achieved at a cost savings relative to indinavir treatment. These results were found to be quite robust to variation in key parameters.