OBJECTIVES: Currently, no active third-line treatment exists for patients previously treated for multiple myeloma, who fail to respond to conventional chemotherapy. A model was developed to evaluate the costs and benefits of a new proteasome inhibitor, VELCADE, relative to best supportive care. METHODS: A two-part mathematical model of survival was applied to individual patient data from the SUMMIT1 trial, a multi-center phase 2, single arm trial of adult patients with a life expectancy of more than three months; in the first part the time to disease progression for patients was estimated; the time from disease progression till death was estimated in the second part. Several survival estimation techniques were applied. Resource use data from SUMMIT were used to estimate costs from the perspective of the NHS in the UK for VELCADE administration, hospital care, concomitant medications and diagnostic tests and surgical procedures on an individual patient basis. RESULTS: By delaying the rate at which disease progresses, VELCADE produces survival gains relative to Best Supportive Care that range between 7.75 to 12.09 months of life depending on the assumed survival profile. Additional costs (2003 prices) of the novel agent were £17,290 without accounting for additional costs incurred during the extended period of survival or £24,121 if such costs are included. Combining these results with various survival estimations yields an incremental cost-effectiveness ratio (ICER) for VELCADE in the range of £17,161- £33,539 per life year gained. CONCLUSION: VELCADE has been licensed in Europe and hence information with regard to its clinical and cost-effectiveness is timely. The range of ICER estimates obtained (£17,000-£33,000 per additional life year) demonstrate cost-effectiveness of VELCADE as compared with Best Supportive Care. These ICER estimates compare favourably to other salvage therapies currently in widespread use throughout the UK.