OBJECTIVES: As part of the submission to NICE, we evaluated the cost-effectiveness of inhaled insulin (INH) in patients with type 1 diabetes uncontrolled on a premix regimen (T1), and patients with type 2 diabetes uncontrolled on oral anti-diabetic drugs (T2). METHODS: Using the perspective of the National Health Service (NHS), a validated Markov model (EAGLE) was used to estimate the incremental costs and QALYs gained of: 1) a basal bolus regimen involving INH versus an injected basal bolus regimen in T1; and 2) a bolus of INH versus i) an injected basal regimen and ii) an injected premix regimen in T2. The model simulates the progression of diabetes in 1,000 patients over a time frame of 20 years. A large UK dataset was used to document the patients' clinical characteristics. NHS reference costs were used as a source for medical costs. Utility/disutility data were collected in published studies and clinical trial data were used to document the efficacy of therapies. An annual 3.5% discount rate was used for both costs and outcomes. Probabilistic sensitivity analysis was performed. RESULTS: In T1 the total incremental costs (IC) were £202,746 and the total QALYs gained (IE) were 24, leading to a mean incremental cost-effectiveness ratio (ICER) of £8,510/QALY. In T2, the mean lCER versus basal was £24,285/QALY with IC of £497,749 and IE of 21. The mean ICER versus premix was £24,555/QALY with IC of £503,185 and IE of 21. The probabilistic sensitivity analysis showed that for a willingness to pay of £30,000 per QALY gained, INH was cost-effective in 100% of the T1 simulations and in 92 to 95% of T2 simulations. CONCLUSION: INH is a cost-effective therapy for T1 and T2 patients uncontrolled on their current therapy in the UK setting.