OBJECTIVE: To determine the cost and cost-effectiveness of tamoxifen for breast cancer risk reduction. Breast cancer affects one of every nine American women. Tamoxifen is the only drug approved by the US FDA for breast cancer risk reduction. Little research has been done on cost-effectiveness of this therapy. METHODS: A cost-effectiveness analysis was used to evaluate the economic impact of five-year preventive therapy with tamoxifen. Data from a large randomized clinical trial (National Surgical Adjuvant Breast and Bowel Project P1) were used to develop this cost effectiveness analysis. Study participants were a hypothetical cohort of at-risk US females between age 40 and 75 years. The analysis was done from a societal perspective, using a 3% annual discount rate. Health effects were measured by life year saved and quality adjusted life year (QALY) gained from the treatment. Cost effectiveness results were determined as incremental costs per QALY. RESULTS: Under the base case assumptions, tamoxifen therapy increased expected average medical cost $16,838 over five years. The net five-year average medical cost associated with therapy was $27,365. Average discounted survival benefits were 0.523 year of life and 0.384 QALY per participant. This resulted in average cost-effectiveness ratios of $32,195 per year of life and $43,848 per QALY saved. Results of the model were relatively insensitive to reasonable parameter changes. Tamoxifen therapy was substantially more cost-effective for high-risk females ($22,459 per life year and $33,150 per quality adjusted life year). CONCLUSIONS: The cost per QALY of tamoxifen in patients at moderate and substantially elevated breast cancer risk compares favorably with that for many other standard medical interventions. Therefore, five-year tamoxifen therapy is a cost-effective approach for breast cancer risk reduction.