OBJECTIVE: An economic model was developed to estimate the comparative cost-effectiveness of treating unstable bladder (UB) with tolterodine immediate-release (2mg bid), oxybutynin (5mg bid) and “no treatment” in Italy. The model uses a one-year timeframe and the payer perspective. METHODS: The treatment population was based on the percentage of patients seeking treatment in Italy. The treatment population was divided into successfully treated patients (STP) and patients failing treatment (PFT). The percentage of STP was calculated from clinical efficacy adjusted by annual persistency. For each group of patients, five categories of costs were identified: drug costs; incontinence pads; physician visits; lab tests/diagnostics, and associated comorbidities. Resource utilization and costs were obtained from the national health service, diagnostic and hospital codes (diagnostic related groups) and expert medical panels. RESULTS: The prevalence of UB sufferers in Italy is estimated to be 12% in 2001 (approximately 7 million people), with only 23% of those patients seeking treatment. STP use fewer pads per day, visit physicians more frequently, have fewer lab tests/diagnostics, and experience fewer comorbidities than PFT. Efficacy is similar between tolterodine and oxybutynin. Persistence on therapy is higher for tolterodine compared to oxybutynin (70% for tolterodine, 19% for oxybutynin). As a result, effectiveness is higher for tolterodine than for oxybutynin (42% for tolterodine, 9.5% for oxybutynin, and 0% for “no treatment”). Cost per STP in 2001 is lower for tolterodine (5523L. (€2.85)) than oxybutynin (17265L. (€8.92)). The “no treatment” group demonstrated the highest non-drug costs while providing no efficacy. CONCLUSION: This economic model demonstrates that tolterodine is more cost-effective than oxybutynin in treating unstable bladder as measured by cost per successfully treated patient in Italy.