OBJECTIVES: Recent studies have demonstrated slightly improved gastrointestinal (GI) complication rates with cyclooxygenase-2 (COX-2) inhibitors versus non-steroidal anti-inflammatory (NSAID) medications in patients not taking aspirin, however the cost avoidance from such events alone does not justify the high costs of these agents. Evidence that other non-GI adverse events may be lower with COX-2 inhibitors is emerging. Since efficacy of these agents appears to be similar, analysis of value can be compared by evaluating adverse event profiles. The purpose of this pharmacoeconomic model is to characterize the relative cost effectiveness of celecoxib and rofecoxib compared to traditional NSAIDs in osteoarthritic patients not taking aspirin from the perspective of the Veterans Affairs (VA) Healthcare System. METHODS: Data from recently published outcome studies was incorporated into TreeAge software to construct the one-year decision analysis model. The primary cost drivers thought to influence cost effectiveness were complicated GI bleeds, hospitalizations, and symptomatic ulcers, as well as differences in renal toxicity, dyspepsia, anemia, hypertension and edema. Sensitivity analysis was performed on all major indices based on variations in results found in reviewed studies. RESULTS: Overall rates of adverse events were similar for all agents (75% NSAIDs, 72% celecoxib, 78% rofecoxib), however celecoxib was associated with less events relating to primary cost drivers. These differences are attributed mainly to variances among adverse event probabilities for hypertension and edema (NSAIDs 4.7%, 4.4%, celecoxib 1.6%, 2.9%, rofecoxib 6.4%, 6.3%, respectively). Cost of drug treatment per year for NSAIDs, celecoxib, and rofecoxib are $36.00, $466.00, and $482.00, respectively, based on Federal Supply Schedule (FSS) pricing. CONCLUSIONS: Based on preliminary data, therapy with COX-2 inhibitors does not appear to be cost-effective to prescribe for all osteoarthritic patients within the VA Healthcare System. Results may be extrapolated to other healthcare settings assuming medical costs are similar.