OBJECTIVE: To compare the annual costs of treatment incurred by a health plan for patients diagnosed with actinic keratosis (AK) and treated with fluorouracil or cryosurgery. METHODS: Pharmacy and medical claims from 2.7 million members of a managed care organization in California, Oklahoma, Oregon, Texas, and Washington, were examined. Adult patients newly treated for AK with either 5% fluorouracil cream or cryosurgery, between January 1 and December 31, 2001, were identified. Patients treated with cryosurgery were further stratified by number of lesions (i.e., 1, 2-14, >15). Disease-related health care costs (pharmacy and medical) for a 2-year follow-up period were evaluated. RESULTS: Of the 9279 identified patients, 498 (5.4%) were treated with fluorouracil and dermatologists prescribed this medication (48.4%) more often than other specialties. Among the 8,781 patients treated with cryosurgery, 3004 (34.2%), 5,130 (58.4%), and 647 (7.4%) were identified with 1, 2-14, and > 15 lesions, respectively. Total disease-related health care costs during the follow-up period for the fluorouracil cohort averaged $509, compared to $296, $523, and $898 for the 1, 2-14, and > 15 lesion cohorts, respectively. CONCLUSION: AK is a common pre-malignant lesion that can develop into squamous cell carcinoma. Numerous options are available for the treatment of AK, all of which have been shown to be equally efficacious. In this study, use of 5% fluorouracil cream for the treatment of multiple AK lesions was cost saving compared to cryosurgery. Similarly, because fluorouracil is known to treat sub-clinical lesions, additional savings may be realized for periods longer than two years.