OBJECTIVES: To perform a cost-utility analysis of erlotinib compared with docetaxel for treatment of advanced NSCLC following the failure of prior chemotherapy from the perspective of the Turkey healthcare system. METHODS: A cost-utility analysis was performed using a transition model with three health states (progression free, progression, death); primary endpoint of cost per quality-adjusted life year (QALY) gained. The model compared the impact of erlotinib or docetaxel therapy over a 2-year period (cycle length of 1 month) in patients with stage IIIB/IV NSCLC who had failed at least one prior chemotherapy regimen. Clinical data from the BR.21 (erlotinib) and TAX317 (docetaxel) phase III studies were used; for the purposes of this analysis, it was conservatively assumed that overall survival was equivalent for the two interventions. The time spent in each health state was adjusted for quality of life, including the impact of adverse events (AEs). Costs included were: resource utilisation for each health state and AE (including hospitalisation, physician visits, outpatient examinations, concomitant medicines and required tests), drug acquisition and administration. RESULTS: The total discounted cost of erlotinib was 21,498 YTL (€11,943), compared with 21,667 YTL (€12,037) for docetaxel. Erlotinib was associated with higher QALYs than docetaxel (0.258 versus 0.206; incremental QALYs = 0.053), mainly due to the lower incidence of AEs and the administration route (oral, versus intravenous for docetaxel). Erlotinib was dominant versus docetaxel, with an incremental cost-effectiveness ratio of –3227 YTL (–€1792) per QALY gained. CONCLUSION: This is the first pharmacoeconomic modelling analysis performed for the setting of the Turkish healthcare system. The results show that erlotinib is dominant versus docetaxel for the treatment of relapsed advanced NSCLC, providing higher QALYs at a lower cost. A major contributing factor to the cost-savings observed with erlotinib is its favourable AE profile, particularly its lack of haematological toxicity.