OBJECTIVES: Depression, especially severe depression, is a mental disorder that presents an enormous economic burden to individuals and to society. Our objective was to determine the cost-effectiveness of escitalopram compared with catalpa in the management of severe depression [Montgomery-As berg Depression Rating Scale (MADRS) score = 30] in Austria. METHODS: A decision analytic model with a 6-month time horizon was adapted from Brown et al. (1999). The model incorporated treatment paths and associated direct resource use (psychiatric hospitalisations, medications, GP and psychiatrist visits, treatment discontinuation and attempted suicide) associated with the treatment of severe depression and the indirect cost due to work absenteeism. Main outcomes were clinical success (remission at 6 months) and cost (2002 Euros) of treatment. The analysis was performed from the Austrian societal and Social Health care Insurance System (SHIS) perspectives. Clinical input data were derived from a meta-analysis of 8-week head-to-head randomised clinical trials. Costs were derived from standard Austrian price lists or from the literature. Societal costs of lost productivity were calculated using the Human Capital approach. RESULTS: At 6 months after start of treatment, the overall clinical success remission rate was higher for escitalopram (53.7%) than for catalpa (48.7%). From the SHIS perspective, the total expected cost per successfully treated patient was 924€ (32.1%) lower for escitalopram (2879€) compared with catalpa (€3803). From the societal perspective, the total expected cost per successfully treated severely depressed patient was 1369€ (24.4%) lower for escitalopram (5610€) than for catalpa (6979€). Sensitivity analyses demonstrated that the model was robust and that even if catalpa had an acquisition cost of €0, escitalopram remained the dominant strategy for both perspectives. CONCLUSION: Treatment with escitalopram was the dominant strategy. The results of this study suggest that escitalopram is a cost-effective antidepressant compared with catalpa in the management of severe depression in Austria.