Inhaled corticosteroids have revolutionized the treatment of asthma and have now become the mainstay of therapy for patients with chronic disease. OBJECTIVE: The primary objective was to determine the relationship between inhaled steroid use patterns and asthma-related total health care cost (e.g. as hospitalizations, emergency room visits, and pharmacy cost) from a managed care perspective. METHODS: Retrospective computerized claims records from a large managed care organization were analyzed. Patients were included if they had an IDC-9 diagnosis code for asthma (493.xx) and received at least 1 inhaled beta agonist during a 3 month identification period. Patients who received a steroid inhaler during the identification period were included in the treatment group and those who never received a steroid inhaler were included in the control group. All patients were followed for a 1 year period, but were excluded if they were not continuously enrolled in the health plan. RESULTS: Patients who received a steroid inhaler had a higher pharmacy cost compared to those who did not ($453 versus $894, P<0.001). In a multivariate regression analysis controlling for potential confounding factors such as age, gender, benefit design, disease severity, and number of comorbidities, pharmacy cost remained higher in the steroid inhaler group (Beta = $428, P<0.0001). In a similar regression analysis, total health care cost was lower in the steroid inhaler group (Beta = -$1,892, P<0.001). Furthermore, the use of steroid inhalers was associated with less utilization of methylprednisolone dose packs. CONCLUSION: The higher cost of inhaled steroid use appears to be offset by a reduction in hospital and emergency room visit cost.