OBJECTIVE: Clinical trial data has proven hormonal therapy increases survival time when added to a radiation treatment strategy for locally advanced prostate cancer. The purpose of this analysis was to assess from the payers' perspective the cost effectiveness of adding hormonal therapy to radiation therapy when treating patients with locally advanced prostate cancer. METHODS: A decision tree model incorporating a Markov process was developed using DATA 4.0 to determine the cost associated with a locally advanced prostate cancer patient gaining an additional year of life as a result of adding goserelin, a gonadotropin-releasing hormone agonist analogue, to a radiation treatment strategy. Data on the effectiveness of each strategy was obtained from published clinical trials. Costs were based on the literature and data from the US Centers for Medicaid and Medicare Services and the UK Department of Health. All costs and benefits were discounted at five percent. Conventional and probabilistic sensitivity analyses were used to assess model robustness. RESULTS: Over a 9-year period, expected costs of treatment with radiation alone and with radiation plus goserelin are $7,582 and $25,299, respectively, leading to an incremental cost of $17,718 to add hormonal therapy to a radiation only treatment strategy. In terms of effectiveness, over a nine-year period, patients treated with hormonal therapy in addition to radiation therapy gain an average of 0.65 years of life. The incremental cost effectiveness of combination therapy over radiation alone is $30,887 per additional life-year gained. Varying model parameters resulted in incremental cost effectiveness values ranging from $19,612-$56,120 per additional life-year gained. CONCLUSIONS: The increase in survival time associated with adding goserelin to a conventional radiation treatment strategy comes with additional costs. However, the addition of goserelin to radiation is cost-effective based on the often cited $50,000/per life-year gained incremental cost-effectiveness threshold.