OBJECTIVE: This study investigates the incremental cost of dry eye disease (keratitis sicca) in a managed care population. METHODS: Patients with dry eye diagnoses (ICD-9-CM=370.33, 375.15, 710.2) or punctal occlusion procedures (CPT-4=68760, 68761) during 1997-1998 were identified from PharMetrics’ Integrated Outcomes database of 7 million patients. Controls were randomly selected and matched 1:1 to dry eye cases on age category, gender and managed care plan. Costs were calculated for 6 months before and after the first dry eye-related claim for cases, or the midpoint of claims history for controls. RESULTS: The prevalence of dry eye disease was 0.48% in 1997 and 0.39% in 1998. Dry eye patients (n=31,683) were more likely than controls to use ophthalmic medications, many of which are not indicated for dry eye (P < .001). Use of non-ophthalmic medications was similar between cohorts. Total charges rose $454.79 (22.2%) for dry eye patients, significantly more than for controls ($289.48 [15.9%]) (P < .001). This was mostly due to a rise in outpatient charges ($257.40 [28.7%] for cases versus $76.14 [11.2%] for controls). Dry eye diagnoses/procedures were associated with greater increases in outpatient charges, pharmacy charges, and total medical charges (P < .0001). Dry eye patients experienced a greater average increase in total medical costs than did controls, mostly arising from outpatient charges. CONCLUSION: We conclude that a major factor in dry eye-related cost increases is additional physician visits, which may be a consequence of the ineffectiveness of available therapies.