OBJECTIVE: The purpose of this study was to evaluate cost per mycological treatment of oral antifungal drugs and to determine the most cost-effective primary treatment for onychomycosis using the Idaho Medicaid claims data. METHOD: Oral gresofulvin, itraconazole, ketoconazole, fluconazole and terbinafine were the antifungal drugs used to determine the cost per mycological treatment and relative cost effectiveness ratios. The Idaho Medicaid database was screened using ICD-9 code, from Oct 1992 to Nov 1998 to identify patients receiving treatment for onychomycosis. Five hundred and forty-nine patients using one antifungal drug were identified and were followed for a period of one-year following a diagnosis of fungal infection of the nail and an associated prescription of an antifungal agent. Costs for drugs, physician visits, and drug management was used in the treatment model. CPT codes were used to identify laboratory cost involved in drug management. The Mycological cure rates obtained from clinical trials reported in literature were used as a measure of treatment efficacy. Relative cost effectiveness was calculated assigning a value of 1.0 to terbinafine. RESULTS: The mean total treatment cost for each patient for griseofulvin was $460.72, for itraconazole was $872.91, for ketocanazole was $464.78, for fluconazole was $216.80 and that of terbinafine was $186.57. Terbinafine also had the lowest cost ($230.33) per mycological treatment after adjusting for cure rates, for one treatment regimen. Relative cost effectiveness for griseofluvin was 2.94, for itraconozole 4.07, for ketoconazole 3.36 and fluconazole was 1.58. CONCLUSIONS: Terbinafine was found to be more cost-effective primary drug compare to griseofulvin, itraconazole and ketoconazole in the treatment of onychomycosis. Fluconazole was found to be the second most cost-effective next to terbinafine.