OBJECTIVES: Sitagliptin was the first dipeptidyl peptidase 4 (DDP-IV) inhibitor to be approved by the FDA. The comparative economic value of thiazolidinediones (TZDs) and the new (DPP-IV) class of oral diabetes medications has not been studied. We estimated the cost-effectiveness of pioglitazone compared with sitagliptin in treating T2DM over a lifetime horizon in the US setting. METHODS: Clinical efficacy parameters for pioglitazone were extracted from Goldberg RB et al, 2005. Sitagliptin parameters were extracted from Aschner P et al, 2006 and assumed no lipid effects. Both were entered into a validated economic model for T2DM. A series of Markov constructs simulated the progression of diabetes-related complications (cardiovascular, neuropathic, renal, and ophthalmic). Transition probabilities and HbA1c-dependent adjustments were derived from published epidemiological studies. Mean baseline HBA1c was comparable (7.6% for pioglitazone, 8.04% for sitagliptin). Costs of diabetes complications were taken from published sources. Drug acquisition costs for pioglitazone and sitagliptin were assumed to be $4.91/day and $4.86/day, respectively (WAC prices, 2007), and continued over the duration of the simulation. The time horizon was 35 years and costs were discounted at 3% per annum. Univariate sensitivity analyses were conducted to test the robustness of the base case cost-effectiveness ratios. RESULTS: The incremental life-years (LY) and quality-adjusted life years (QALYs) gained for pioglitazone versus sitagliptin were 0.111 and 0.075 years, respectively, at an overall increased total health care cost of $359 per patient over the specified time horizon. Therefore, the incremental cost-effectiveness ratios (ICER) were $3236/LY and $4804/QALY gained for pioglitazone versus sitagliptin. Sensitivity analyses demonstrated that the base case cost-effectiveness ratios were most sensitive to changes in HbA1c and high density lipoprotein (HDL) values. CONCLUSION: Our economic modeling analysis suggests that pioglitazone may deliver superior economic value when compared to sitagliptin due to improved HbA1c and cardiovascular outcomes at reasonable incremental cost.