OBJECTIVE: Retrospective analysis of administrative claims data was performed to evaluate impact of a single course of isotretinoin therapy on direct cost of medical treatment for severe recalcitrant nodular acne (SRNA). Results were compared with projections of annual cost of conventional therapy (excluding isotretinoin). Data and METHODS: Using the MEDSTAT Marketscan database, we identified 475 subjects aged 12-35 who received a single course of isotretinoin lasting 90 days or longer from 1995-1998. Acne-related expenditures were calculated during isotretinoin treatment and for periods of 12 months pre and post-isotretinoin. Direct costs (isotretinoin, systemic/topical antibiotics, laboratory tests, and doctor office visits) were examined, relative to individual subject characteristics (gender, age, health plan). Applying a published methodology, projections of annual cost of conventional therapy were made by costing an algorithm for treatment, including antibiotic and topical therapies (Bergfeld et al., J Am Acad Dermatol 1995;32 (suppl):S52-S56). RESULTS: On average, subjects received isotretinoin for 141 days at cost of $1231. Mean total acne-related expenses declined from $471 (median, $311) per year prior to isotretinoin therapy to $135 (median, $48) per year after treatment (p<.01). More than 25% of subjects had no acne-related expenditures for at least 12 months post-isotretinoin. Using projections for annual cost of conventional therapies, average total therapy-related expenditure for isotretinoin course ($1543, year 2000 dollars) would be recouped in 8 months for treatment of minocycline+topical tretinoin; with shorter time to recoup cost with branded medications. Projections for combination therapy of topcial tretinoin+either oral erythromycin or tetracycline, indicated that isotretinoin expenditure would be recouped in 1.9 to 2.3 years. CONCLUSION: Isotretinoin therapy substantially reduces total acne-related direct medical expenditures and may result in substantial cost savings. In addition, the comparison of expense for isotretinoin therapy with the estimated annual cost of long-term conventional treatment demonstrates an opportunity for substantial healthcare savings in the treatment of SRNA.