OBJECTIVE: The best therapeutic approach to treating lupus nephritis (LN) remains contentious; therefore different therapeutic approaches have been embraced over the years. The purpose of this pharmacoeconomic decision analysis is to compare the use of intermittent intravenous cyclophosphamide plus prednisone versus oral azathioprine plus prednisone for the treatment of LN and to determine which regimen is more beneficial in terms of cost. METHODS: The third party payer perspective was used to estimate the costs of treating LN, after deciding to prescribe either regimen. Costs were obtained from various sources including primary literature and clinical trials. Analyses were based on actual costs for treatment of LN and include drug costs, drug administration costs, physician charges for monitoring, and cost for dialysis or kidney transplants for those progressing to ESRD. Costs were modified to 2003 US$ using the medical care component of the Consumer Price Index adjustment for inflation ratio, and discounted at 3%. Cost were calculated on a per patient basis and then annualized. Statistical comparisons of costs were done using a nonparametric Mann-Whitney U test. Sensitivity analyses were also performed. RESULTS: Lupus nephritis patients receiving azathioprine plus prednisone had significantly lower overall treatment costs, demonstrating a $14,580 cost savings per patient over the 10-year evaluation period. The Mann-Whitney U test indicated that the azathioprine and cyclophosphamide arm costs $101,003.25 and $115,583.54, correspondingly were significantly different (P = 0.0091, 95% CI: $482, $2484). The mean difference between the treatment arms was $1453. Sensitivity analyses conducted on the drug costs, and the probability of discontinuation of cyclophosphamide did not change the results of the model. CONCLUSIONS: The results indicate that azathioprine significantly reduced the total long-term costs to the third party payer. The decision analysis supports the use of azathioprine plus prednisone as induction therapy in the treatment of lupus nephritis.