OBJECTIVE: Of estimated 112 million persons infected with CHB in China, 15-40% will eventually develop liver complications. Most of the patients do not actively seek antiviral agents for treatment probably due to high cost and uncertain long-term outcomes. Entecavir is a new therapeutic option for CHB patients and the purpose of this study was to evaluate the cost effectiveness of entecavir treatment in China, based upon estimated clinical benefits. METHODS: We took the perspective of the Chinese Social Security program. Multivariate-adjusted relative risks with viral load (VL) categories were estimated from a published Taiwan CHB cohort with 42,115 person-years of follow-up, and applied to patients enrolled in a randomized phase III trial in China in which HBV DNA was a primary endpoint after 48 weeks of therapy with either entecavir or lamivudine monotherapy. Entecavir and lamivudine daily prices were assumed RMB yuan 40 and 16.71, respectively. Life expectancy tables were based on China vital statistics. Direct medical cost of and utility scores for different phases of CHB were estimated from published China specific data, and costs were adjusted to year 2005 value using Chinese Consumer Price Index information. Probabilistic sensitivity analyses were conducted to evaluate parameter uncertainty on event distribution and treatment failure rates beyond trial period. RESULTS: 519 subject started double-blind treatment; males (82%); HBeAg+ (87%); mean age 30 years. Entecavir was superior to lamivudine as the proportion of subjects who achieved HBV DNA<300 copies/ml by PCR assay at Week 48, 78.7% versus 46.7%, respectively, (P<0.05). In the base case, compared with lamivudine, one year of entecavir therapy yielded a net cost saving of 2123 yuan and 0.71 quality-adjusted life year (QALY) gain, with 98.5% of 1000 Monte Carlo simulation estimates below 5000 RMB/QALY. CONCLUSIONS: Entecavir is a highly cost effective choice of treating hepatitis B patients in China.