OBJECTIVES: Overlap of gastro-oesophageal reflux disease (GERD) and peptic ulcer disease (PUD) in a population with high prevalence of Helicobacter pylori infections creates clinical dilemmas in Hong Kong. Testing and eradication of H. pylori may be a cost-effective alternative for empirical proton-pump inhibitor (PPI) therapy. To examine the potential clinical and economic impact of H. pylori "test and treat" and empirical PPI therapy for GERD patients with typical reflux and high prevalence of H. pylori infection. METHODS: A Markov model was designed to simulate the outcomes of the two treatment strategies over 12 months. The transition probabilities and resource utilization were derived from literature. Percentage of patients with PUD treated, total number of quality-adjusted life-years (QALY's) gained and total direct medical cost were estimated. RESULTS: H. pylori "test & treat" was more effective (92.6% ulcer treated and 0.919 QALYs gained) than empirical PPI (72.6% ulcer treated and 0.909 QALYs gained). The direct medical cost per patient in the H. pylori "test and treat" and empirical PPI arms were USD1901 and USD1770, respectively. The direct medical cost per patient was sensitive to the variation of the prevalence of PUD in H. pylori-infected GERD patients. CONCLUSIONS: H. pylori "test & treat" appeared to be more effective than empirical PPI therapy, with an incremental cost, for GERD patients with typical reflux in Hong Kong.