OBJECTIVES: To model the incremental cost-utility of Exelon Patch versus best supportive care (BSC) in the management of Alzheimer's disease (AD), from the perspective of the UK NHS. METHODS: The incremental costs and Quality Adjusted Life Years (QALYs) associated with Exelon Patch treatment versus BSC were calculated using an economic model. Changes in Mini Mental State Examination (MMSE) scores over a 5-year period were used as a measure of the progression of AD. The clinical pathway was populated based on the results of the pivotal IDEAL trial, with 12-month follow-up data from patients who received Exelon Patch (n = 383) and 6-month follow-up data from patients who received placebo (n = 282). The progression of the disease was modelled beyond the study period using published equations to predict the natural decline of MMSE in AD patients. Costing variables included drugs, clinical monitoring and institutionalisation. RESULTS: Exelon Patch was shown to provide an incremental 0.1045 QALYs at an additional cost of £1,363 per patient, giving a cost-utility of £13,042 per QALY gained. One-way sensitivity analysis suggested that the main determinants of cost-effectiveness were the probability of institutionalisation, the relationship between MMSE states and quality of life, and the health economic perspective adopted. When informal care costs were included in the analysis, Exelon Patch was calculated to cost £634 per QALY gained. CONCLUSION: Exelon Patch has a superior cost-effectiveness profile than many treatments currently funded by the NHS. Further research studies focusing on activities of daily living to demonstrate costs and benefits of treatment are warranted.