OBJECTIVE: New generation nonsteroidal aromatase inhibitors are potent, selective and well-tolerated anti-estrogens which improve survival of advanced breast cancer patients when used as second-line agents. Anastrozole, an aromatase inhibitor, was recently investigated as first-line therapy,. Its cost, however, is 10 times higher than the cost of tamoxifen. Consequently the cost-effectiveness of anastrozole is to be investigated. METHODS: We first addressed the cost per month-without-progression with a three-state Markov tree (response; progression; withdrawal) with monthly transitions. The probability of progression was obtained by pooling the data from estrogen-positive women enrolled into the three randomized clinical trials. The monthly rate of withdrawal was assumed to be time-independent and the cost of withdrawal was equivalent to the approximate charge for a thromboembolic event. According to the Italian market, the monthly cost of tamoxifen was $18 and that of anastrozole, $190. No other difference in costs was assumed between the two treatments. RESULTS: Since anastrozole allowed for a gain of 1.77 progression-free months, the resulting marginal cost-effectiveness of anastrozole versus tamoxifen was $1395/month-without-progression. We then calculated the lag time from progression to death and considered the average monthly cost of those patients who progressed while on first-line therapy to be $1000. The cost-effectiveness of anastrozole was thus $19,428/life year saved and, after adjustment for quality of life, $33,476/QALY. The results were not sensitive to an increase in drug cost of 30%, while they were sensitive to a variation in the relative risk of progression. CONCLUSION: Anastrozole is a cost-effective second line therapy for post-menopausal women with advanced breast cancer and positive for estrogen receptors. It is also a potentially cost-effective first-line hormonal therapy. Both clinical and economic data are needed from cross-over trials to confirm the cost-effectiveness in this indication.