OBJECTIVES: This study estimated the costs of treating pancreatic cancer and evaluated the additional costs when initial treatment failed and secondary treatment or terminal care were needed. METHODS: This claims-based retrospective study used the MarketScan Commercial and Medicare databases. The study included patients first diagnosed with pancreatic cancer (ICD-9-CM 157.xx) between January 1, 1999 and November 30, 2000. A demographically-matched control group was selected at a ratio of 3:1. Non-terminal treatment provided to cancer patients upon diagnosis was categorized as initial treatment. Chemotherapy switches or additional treatment occurring three months after the end of initial treatment were noted as secondary treatment following treatment failure. Care provided after the onset of advanced disease, during the 12 months prior to death, or in hospices or nursing facilities was defined as terminal treatment. Monthly mean costs were adjusted for age, gender, Charlson Comorbidity Index, region, follow-up length and hospital mortality using ordinary least square regression. RESULTS: The study included 412 cancer patients and 1,236 matched controls. Mean follow-up was 7.5 months. Adjusted mean monthly health care costs were $7613 for cancer patients and $334 for controls (p <0.05). Inpatient care accounted for the majority of costs among cancer patients. Approximately half (51.7%) of the eligible patients did not respond to initial treatment, and these patients incurred $15,000 more per month than patients who required no additional treatment. The costs of additional treatment and higher initial treatment costs contributed to the cost burden of treatment failure. CONCLUSIONS: The direct costs of pancreatic cancer are substantial, and these costs are especially pronounced when initial treatment fails. The causes of treatment failure, and the interventions that may prevent or delay these occurrences, should be investigated further.