OBJECTIVES: Capecitabine-docetaxel (CD) combination therapy significantly prolongs time to disease progression and overall survival, compared with docetaxel monotherapy (D). This study assessed the cost-effectiveness of CD versus D from perspective of a US health delivery organization. METHODS: The model is based on analyses of a 2-armed, balanced, multicenter, randomized trial of CD compared with D for the treatment of advanced anthracycline-pretreated breast cancer (n=511). Mean time to progression and mean survival were estimated using Kaplan-Meier methods. Data were collected on hospital resource use data, infusions, drug use, and number of consultations. Adjustments for QoL and cost per unit of resources were based on published data. The uncertainty in the cost-effectiveness was estimated using Monte Carlo simulation methods. RESULTS: CD resulted in longer mean duration of treatment (129 days) than D (98 days). Patients lived an average of 80 days longer with CD and experienced 64 days longer progression-free survival. No significant differences were observed in medication use and consultations. Patients receiving CD had fewer treatment-related hospitalization days (4.8 days versus 5.5 days per patient). Because of the lower planned docetaxel dose in the combination arm (75 vs 100mg/m2), the cumulative dose of docetaxel was 648 mg in combination, compared with 847 mg in monotherapy. 93% of the acquisition cost of capecitabine was offset by lower docetaxel costs for total added costs of $1,341. Cost per quality-adjusted year of life (QALY) gained with CD was $5,520. The 5th and 95th percentiles of cost-effectiveness were $4,400 and $11,600, respectively. CONCLUSIONS: Combining capecitabine with docetaxel is cost-effective compared with docetaxel monotherapy in anthracycline-pretreated patients, by CD significantly prolonging time to progression and overall survival and lowering treatment-related hospitalization days. The results of the simulation analyses provide assurance that combination therapy is likely to be cost-effective when applied to non-trial settings.