Osteoporosis affects approximately 24 million Americans and accounts for an estimated annual direct medical costs of over $13.8 billion. An economic analysis that evaluates the effectiveness of osteoporosis medications for prevention of bone fractures in a naturalistic setting has not been formally conducted. OBJECTIVES: To compare differences among four therapeutic alternatives [estrogen replacement therapy (ERT), raloxifene, nasal calcitonin, and alendronate] with respect to healthcare costs (pharmacy, medical, and total), and time to fracture. METHODS: Retrospective pharmacy and medical claims data from a large managed care organization were analyzed. Patients were included if they were diagnosed with osteoporosis and newly initiated on medication between 1/1/98-12/31/98. All patients were followed for exactly 1 year. Cost data was log-transformed to correct for skewness. ANCOVA was conducted to compare total healthcare costs; Cox Proportional Hazard Model was performed to compare the risk of fracture. Total healthcare costs was defined as all osteoporosis-related services covered. RESULTS: There were 12,757 female patients identified for the analysis and the average age was 70(S.D.=10). A total of 1,721(13.5%) patients had a fracture after initiation of drug therapy. After adjusting for age, prior medication costs, prior fracture event, and comorbidities, adjusted means (95%CI) of log-transformed total healthcare costs was lowest for ERT 5.87(5.84-5.90), compared to raloxifene 6.32(6.19-6.46), alendronate 6.55(6.51-6.59) and calcitonin 7.20(6.61-7.80). Compared to calcitonin, the adjusted hazard ratios (95%CI) for a fracture were 0.174(0.078-0.39) for ERT, 0.175(0.078-0.39) for alendronate, and 0.160(0.068-0.377) for raloxifene. CONCLUSIONS: In this population, ERT was associated with statistically significant lower total healthcare costs compared to raloxifene, alendronate, and calcitonin. Raloxifene was associated with statistically significant lower total healthcare costs compared to calcitonin and alendronate. Furthermore, hazard ratios showed that patients taking ERT, raloxifene, or alendronate were approximately 83% less likely to experience fracture at any point in time compared to calcitonin.