In Taiwan, the carrier rate of HBsAg is 15-20%, one of the highest in the world. Among chronic hepatitis B (CHB) patients, HBeAg-negative disease accounts for roughly 40-50% of patients. A recent trial showed that peginterferon alfa-2a (40KD) (PEG) was more effective than lamivudine (LAM) in treating HBeAg-negative CHB. The cost-effectiveness of PEG compared to LAM has not been evaluated. OBJECTIVE: To evaluate the incremental cost-effectiveness of 48 weeks of PEG compared to 48 weeks of LAM, from the perspective of the Taiwan Bureau of National Health Insurance. METHODS: A Markov model was developed to simulate the natural history of HBeAg-negative CHB in a cohort of 40-year old patients. Efficacy, disease progression, economic, and quality of life data were extracted from the published literature and validated by clinical experts in Taiwan. Life expectancy, quality-adjusted life expectancy, lifetime costs (NTD$), and incremental cost-effectiveness ratios (ICERs) were computed. Sensitivity analyses were undertaken. RESULTS: The gain in quality adjusted life years (QALYs) for 48 weeks of PEG compared to 48 weeks of LAM was 0.45 at an additional cost of NTD$157,000 (US$5,000), resulting in an ICER of NTD$347,000 (US$11,000) per QALY gained. Despite plausible variation in each parameter used in the analysis, the ICER did not exceed NTD$448,000 (US$14,000) per QALY gained. CONCLUSIONS: In HBeAg-negative CHB, 48 weeks of treatment with PEG compared to 48 weeks of LAM appears to offer life expectancy and quality of life improvements at a favorable cost-effectiveness ratio.