OBJECTIVE: This analysis addresses the cost-effectiveness of the new extended release formulation (XL) of Ditropan (oxybutynin) for the treatment of overactive bladder relative to immediate release Detrol (tolterodine), if the drugs are priced equivalently. METHODS: A state-transition model was developed to compare health economic outcomes over the course of one year. Effectiveness and treatment persistence data were derived from the OBJECT trial, a 3-month randomized, double-blind study comparing Ditropan XL 10mg with Detrol 4mg and used, together with data from the literature to project outcomes beyond the trial time. Severity-specific cost profiles for incontinence were developed for the province of Ontario, and are reported in 2002 Canadian dollars. In the principal analyses, only direct costs were included and were limited to drug price, physician visits, and pad or protection usage. RESULTS: Ditropan XL is predicted to be the dominant therapeutic option, with higher effectiveness and lower overall costs than Detrol. After 1 year, total costs are expected to be an average of $32 lower per patient with Ditropan XL, while 3.15 more patients per 100 treated attain complete continence (20.4% versus 17.2%). As well, more patients treated with Ditropan XL have less than 7 incontinent episodes per week. Over the course of the year, patients on Ditropan XL are expected to have an average of 16 additional incontinence-free days. Results are most sensitive to relative drug prices, with a price differential of only $0.11 per day required for savings with Ditropan XL to be eliminated. In other sensitivity analyses, however, Ditropan XL maintained its advantage over wide ranges of inputs. CONCLUSION: These analyses suggest that, at price parity, Ditropan XL provides better results than Detrol over 1 year and reduces costs.