OBJECTIVES: We examined the cost-effectiveness (CE) of treatment with adjuvant high-dose Interferon-alpha (IFN-alpha) given in melanoma patients at high-risk for recurrence from a program perspective. METHODS: A continuous-time Markov model with nine health states (no evidence of disease, local-regional recurrence, first salvage local-regional recurrence, second local-regional recurrence, first distant recurrence, salvaged distant recurrence, second distant recurrence, death from melanoma, and death of other causes) was designed to assess the CE of IFN-alpha treatment compared to no adjuvant treatment. Estimates of costs (inflated to 2002), utilities for health states, and treatment benefits were retrieved from published literature. A non-informative prior was used for the survival parameters and patient-level data was simulated with survival parameters retrieved from published literature. To quantify the tradeoff between IFN-alpha toxicity and survival, net benefits were calculated as potential savings in quality-adjusted life years (QALYs). Average costs and benefits were derived from the integration over unknown patient parameters. The posterior incremental cost-effectiveness ratio (ICER) was then simulated as the difference in average cost divided by the difference in average effectiveness. RESULTS: The posterior mean estimate of the incremental costs of the IFN-alpha was $37,000 and the posterior mean estimate of the incremental benefits was 0.75 QALY. The estimated posterior mean ICER was $50,300/QALY with standard deviation $183/QALY. The acceptability curve (CEAcc) shows that the probability that IFN-alpha treatment will lead to improved life expectancy is one. CONCLUSIONS: IFN-alpha treatment is more costly and more effective based on simulated patient-level data. With patient-level data, we will be able to provide information on the variability of model parameters and produce the acceptability curve using the current model.