OBJECTIVE: The objective of this study is to assess the long-term clinical benefits and cost-offsets of oral diabetic management with nateglinide in combination with metformin vs. metformin alone in the Netherlands. METHODS: Data from clinical trials and epidemiological studies have been incorporated in a diabetes model that dynamically relates patient characteristics (demography, cardiovascular risk factors, diabetes history) and glycemic control to diabetic complications. In the model, a cohort of 10,000 patients was followed over a 30-year period for the occurrence of diabetic complications, its associated treatment costs and mortality. The impact of improved glycemic control (HbA1c and postprandial glucose or PPG) was modeled using results from a clinical trial. RESULTS: An incremental reduction of HbA1c by 0.7% and of PPG by 1.4mmol/L of nateglinide combination therapy will reduce the number of patients with end-stage renal disease (ESRD), blindness and lower-extremity amputation by 168, 169 and 197 respectively. Another 78 cases of AMI and 38 cases of cerebral stroke will be avoided. This will result in cost-offsets of NLG 6,527 per patient on average, mainly due to ESRD (72%), stroke (6%), amputation (6%) and blindness (5%). The estimated life expectancy increases by 0.33 years (0.2 years if discounted at 4%). The model was robust for changes in critical assumptions. CONCLUSION: Improved glycemic control as achieved with combination therapy of nateglinide plus metformin will substantially reduce the number of diabetic complications and associated treatment costs over treatment with metformin alone in the Netherlands.