Cost-effective management of diabetes is extremely important for MCOs; however, little is known regarding the short-term economic impact of oral antidiabetic agents. OBJECTIVE: The purpose of the study was to compare, from an MCO perspective, the 3-year costs of three first-line monotherapy strategies in newly diagnosed type 2 diabetes patients: glipizide GITS, metformin, or acarbose. METHODS: A literature-based Markov model using 10,000 Monte Carlo simulations (assuming triangular distributions for the variables) was developed to compare the cost to achieve full glycemic control (HbA1c <7%) with each first-line strategy. Each monotherapy could be succeeded by add-on treatments. The model included costs of routine medical care/supplies, medication, adverse events, and treatment failures. RESULTS: Using a deterministic approach (with Monte Carlo results in parentheses), the 3-year cumulative costs per patient were $4,867 ($4,971), $5,196 ($5,273), and $5,249 ($5,311) for glipizide GITS, metformin, and acarbose first-line strategies, respectively. Main cost drivers were drug prices. Mean 3-year cost savings for first-line glipizide GITS were $301 over metformin, and $340 over acarbose. Between 83% to 85% of all simulations showed cost savings with glipizide GITS over the other agents. CONCLUSIONS: Our model suggests first-line monotherapy with glipizide GITS should result in desirable short-term economic benefits to MCOs. Because the model incorporates recommended glycemic goals and performed well in sensitivity analyses, we believe it is applicable to a variety of clinical practices and useful for economic assessments of new therapies. Results of this model should be verified prospectively in typical care settings.