OBJECTIVE: To evaluate cost-effectiveness (CE) of three drug therapies for preventing osteoporotic fractures in postmenopausal women from a state Medicaid Program perspective using the estimated risk distribution in the study population. The three therapies are: hormone replacement therapy (HRT), alendronate, and raloxifene. METHODS: A hypothetical cohort of white women aged 45-85 years, postmenopausal, and without past incidence of osteoporotic fractures was treated with one of the three alternatives, and tracked over 3 years in a decision model. The CE ratio was defined as the treatment costs [e.g., medications, monitoring, adverse events (AE)] divided by the number of fractures averted. Treatment Willingness-To-Continue (WTC) rate was also considered. Data were collected from literature, expert panel survey, Medicaid claims data, and a risk survey in the study population. Monte Carlo simulations were conducted (distributions used: background risk, cost, and risk reduction rate). Risk or probability of osteoporotic fracture was also divided into three strata: low (risk<0.1), medium (0.10.3). RESULTS: Compared to no therapy, the expected CE of HRT was $29,119 per fracture averted, alendronate: $35,101, and raloxifene: $39,760. The incremental CE was $42,181 for alendronate (relative to HRT) and $85,509 for raloxifene (relative to alendronate). The incremental CE of alendronate and raloxifene were $151,981 and $697,270 among women with low risk (43% of the sample), compared to $11,099 and $34,017 respectively among high-risk women (26% of the sample). CE was not sensitive to discount rate and AE probabilities. CONCLUSIONS: HRT is the most cost-effective strategy even though it may have relatively high monitoring and AE costs, and low WTC rate. The significant decrease in marginal costs of Alendronate and Raloxifene in high-risk women indicates an economic condition to use these two drugs. The study provides a framework to make risk-appropriate coverage decisions for chemo-preventive agents.