OBJECTIVE: Chronic obstructive pulmonary disease (COPD) is the fourth-leading cause of death in the United States and accounts for about 14 billion dollars annually. This study assesses the economic burden of COPD in a state health insurance program in terms of medical resources and pharmacotherapy from a payer perspective. METHODS: Outpatient, hospital and emergency department (ED) claims with a primary ICD-9 code for chronic bronchitis (491.xx), emphysema (492.xx), and chronic airways obstruction (496.xx) dated between July 1, 2001 and June 30, 2003 were extracted from the claims database of a state health insurance program. Unique recipient identifiers obtained from these claims were then used to extract COPD-related prescription claims. Payer reimbursements were used to calculate costs. Rates of use of maintenance medications was assessed for the following therapeutic classes: 1) use of any inhaled anti-inflammatory therapy (inhaled corticosteroids, cromolyn, nedocromil, 2) use of "other" maintenance drugs such as long-acting beta-agonists, leukotriene modifiers, anticholinergics, and theophylline agents. RESULTS: Overall, COPD prevalence was 52.2/1000 recipients. Of the 7165 recipients identified with COPD, 11.8% (N = 848) received inhaled anti-inflammatory drugs, and 19.4% (N = 1389) received "other" maintenance medications for COPD. The hospitalization rate was 7.9 hospitalizations/10,000 recipients, at a mean cost of $1,322 (SD = $1,025) per visit per recipient (pvpr). The rates of outpatient and ED use were 112 outpatient visits/1,000 recipients, and 56 ED visits/10,000 recipients, respectively. The mean cost pvpr for outpatient and ED use was $51 (SD = $72) and $69 (SD = $80), respectively. The total COPD-related annual average expenditures to the payer were $10,051,244 of which prescription use accounted for 95%, followed by outpatient use (4%), hospitalizations (0.7%), and ED use (0.3%). CONCLUSIONS: COPD exerted a significant burden on the payer. Although prescription use accounted for the most dollars, hospital use and costs were significantly lower than national estimates.