Heroin is an extremely devastating drug. Injection of heroin is a major risk factor for infectious diseases such as HIV/AIDS and hepatitis. Heroin addiction often strikes persons in the prime of their working years, robbing society of productive citizens. Furthermore, a significant proportion of heroin users engages in criminal activities to support their habit. OBJECTIVE: This study documents the tremendous costs of heroin addiction, both to the addict and society at large. METHODS: Using a cost-of-illness approach, we identify costs in three major areas: (1) medical care, (2) productivity, and (3) crime. No single dataset currently available is able to fully capture costs in each of these areas. Thus, a variety of data sets and previous studies have been synthesized. RESULTS: We estimate that in 1996 the economic costs of heroin addiction in the United States totaled $22.1 billion. Approximately 23 percent of these costs are due to the medical complications of heroin addiction, primarily treatment for HIV/AIDS and psychiatric comorbidities. Another 24 percent are related to criminal activities, including the cost of incarceration, policing, legal adjudication, and the cost to crime victims. Another 41 percent are associated with lost productivity. For example, heroin addicts are less than half as likely to have a full-time job as compared with the national average. Treatment of heroin addiction accounts and social welfare services each account for 5 percent of the costs. CONCLUSIONS: The significant economic effects of heroin addiction have important public policy implications, especially given that heroin use appears to be rising among adolescents and young adults. This study suggests that greater investment in prevention and treatment activities may be highly cost-effective.