OBJECTIVES: To determine the incremental cost-effectiveness ratio (ICER) of imatinib versus IFN-α+Ara-C in newly diagnosed, chronic phase CML patients. METHODS: An economic simulation model was developed in Microsoft Excel to estimate expected total cost, survival and quality-adjusted survival for patients treated with imatinib or IFN-α+Ara-C. This model is based on data collected in the International Interferon versus StI571 Study (IRIS) supplemented with data from international literature and clinical experts. This model was adapted to the Dutch situation. Utility weights and unit costs for medical resources were assigned over time according to disease status and treatment regimen. Long-term survival estimation was based on historical relationships between cytogenetic response and life expectancy with IFN-α. The analysis incorporated first-order and second-order uncertainty. Sensitivity analyses were also performed to evaluate the influence of individual parameters. The base year for the cost analysis was 2002 and only direct medical costs were considered. RESULTS: Mean undiscounted survival for patients receiving imatinib was estimated to be 15.20 years, for the IFN-α+Ara-C patients this was 9.10 years. When both costs and effects were discounted at 4% the incremental gain in quality adjusted life years (QALYs) was 3.36. Incremental discounted lifetime costs were €150,041 higher for patients receiving imatinib. This resulted in an ICER of 44,728€ per QALY (95% confidence interval; 41,044€, 49,505€). These results were most sensitive to assumptions that affected relative duration and costs of IFN-α or imatinib. CONCLUSIONS: The introduction of imatinib as first line treatment option results in a gain of 3.36 QALYs. However, this occurred at a considerable cost resulting in an ICER of 44,728€ per QALY. In general, this ratio is considered to be high by Dutch registration and reimbursement authorities. However, in the process of registration and reimbursement other aspects like budget impact and disease severity also play an important role.