OBJECTIVES: To analyze direct medical costs for management of nonsteroidal anti-inflammatory drug (NSAID) induced gastrointestinal adverse events, with or without gastroprotective agents, in patients with osteoarthritis or rheumatoid arthritis from the perspective of a public health organization in Hong Kong. METHODS: A decision-tree was used to analyze, over six months, the resource utilization associated with five treatment alternatives: a cyclooxygenase-2 (COX-2) inhibitor (celecoxib); NSAID only; NSAID plus H2-receptor antagonist (H2RA); NSAID plus misoprostol, and NSAID plus proton-pump inhibitor (PPI). Each alternative could lead to five possible outcomes: no gastrointestinal (GI) toxicity; GI discomforts; symptomatic ulcer; anaemia with occult bleeding, and serious GI complications. The probabilities of GI adverse events were taken from the literature. Resource utilization for all outcomes, except for anaemia with occult bleeding, was retrieved from the database of a major public hospital in Hong Kong. The resource utilization for anaemia with occult bleeding was gathered by expert interview. A one-way sensitivity analysis was performed to assess the relative impact of patients' underlying GI risk score, based on the modified version of the Fries risk calculator, on the expected value of each alternative. RESULTS: The costs associated with the alternatives, per base case analysis, were as follows: NSAID plus H2RA HK$966 (1USD=7.8HKD); celecoxib HK$1,189; NSAID alone HK$1,293; NSAID plus misoprostol HK$1,523, and, NSAID plus PPI HK$2,327. One-way sensitivity analysis showed that the cost of NSAID plus H2RA was the lowest in patients with a GI risk score below 15-16 and the cost of celecoxib therapy was the lowest when the GI risk score was greater than or equal to 15-16. CONCLUSION: Based on the decision-tree analysis of the data obtained, NSAID plus H2RA is the least costly regimen in patients with low GI risk score and celecoxib is the least costly alternative in patients with intermediate to high GI risk score in Hong Kong.