OBJECTIVES: Inhaled corticosteroids (ICS) are an important part of asthma treatment; however, their use is associated with localized adverse events (LAEs). This study quantified LAE rates and costs associated with ICS use in the community. METHODS: We assembled a 1:2 age/gender matched cohort of asthmatics age >18 who did and did not initiate ICS using 1998 - 2002 administrative claims data from a large, US managed care organization (N = 20,280). All ICS formulations were considered; patients were followed for one year, and were required to have had no more than one oral or injectable steroid. LAEs were defined as dysphonia, oral candidiasis, throat irritation, cough, upper respiratory infections and sinusitis. We compared LAE rates in two cohorts stratified by asthma severity and selected comorbidities; the incremental cost of a LAE was estimated using multivariate regression that controlled for demographic characteristics, asthma severity, and selected comorbid conditions. RESULTS: The LAE rate among ICS users was 2.2 percentage points (5.6%) higher than non-ICS users (41.2% vs. 39.0%, p <0.01). LAE rates were similar in the two groups when stratified by asthma severity, but were significantly higher among ICS users who had other comorbidities, compared to non-ICS asthmatics with the same conditions. Asthmatics who experienced a LAE had mean charges (exclusive of ICS prescriptions) estimated 49% higher than asthmatics who did not after controlling for confounding (p <0.03). Given sample non-ICS median charges of $249 per-patient-per-month (PPPM), the estimated cost of a LAE was $122 PPPM (49% x $249), and the estimated cost of an ICS-induced LAE was $2.68 PPPM (2.2% x $122). CONCLUSIONS: Our cohort of ICS users has a higher rate of LAEs than non-ICS users. LAEs are associated with ICS use and likely to increase total cost of asthma care. Health care decision makers should consider the LAE profiles and their potential economic impact when evaluating choices for asthma therapy.