Anaemia is a common complication of chemotherapy. Since anaemia can lead to different symptoms, such as fatigue, respiratory distress and chest pain, thereby diminishing physical capacity and quality of life, it is generally accepted that anaemia should be corrected. Treatment options include red blood cell transfusion (RBCT), erythropoietin (EPO) administration or a combination of both. OBJECTIVE: Our objective was to carry out a cost-effectiveness analysis of treatment with EPO (erythropoietin alpha) compared to traditional treatment with RBCT for patients with chemotherapy-induced anaemia in Sweden from a hospital perspective. METHOD: We developed a model for Swedish treatment practice (patient characteristics, response rates, and RBC transfusion data taken from Swedish observational data), and Swedish unit costs, based on a model commissioned by the National Institute of Clinical Excellence, UK. Incremental costs associated with EPO treatment compared to treatment with RBCT, were estimated. Different cancer types and populations were modelled by varying initial Hb, response and mortality rates. RESULTS: The model results on costs correspond well to real world data from three big hospitals in Sweden. Average costs per patient are SEK34,900 for EPO and SEK 12,400 for RBCT. The cost per QALY gained from administration of EPO assuming a survival benefit attributable to EPO treatment was estimated at SEK 120,000. The survival benefit from EPO is debated, and has a major impact of the results. Excluding this benefit gives an estimated cost of SEK 365,000 per QALY. EPO treatment is most cost-effective in patients with initial Hb of 9-10 g/dl. The cost-effectiveness-ratio is also moderately sensitive to changes in the response rate to EPO, baseline mortality, the cost of EPO and the estimated QALY gain from EPO administration. CONCLUSION: The estimated cost per QALY falls well within the range acceptable in Sweden. The cost-effectiveness of EPO varies between different cancer populations.