OBJECTIVES: To examine the direct costs of erectile dysfunction (ED) in a managed care setting. METHODS: A naturalistic and retrospective observational study was conducted with an ED cohort (285,436) of men age 18 or older and enrolled in 51 US health plans that covered 28 million lives from 1999 through 2001. Both annual costs of ED care per patient with ED and annual costs of ED care per user were measured for each category of ED-related care and treatments. RESULTS: On average, health plans spent $83.91, $95.41 and $119.26 on ED care for a patient with ED in 1999, 2000, and 2001 respectively. In 2001, an ED patient spent $44.22 on phosphodiesterase type 5 (PDE-5) inhibitor therapy, $14.56 on ED-related physicians' evaluation and management, $10.13 on ED-related diagnosis procedures, $10.08 on ED-related testosterone therapy, $2.70 on intracavernosal injection, $1.49 on alprostadil pellet, $3.27 on penile prosthesis implantation, $0.72 on vacuum erection device, and $0.13 on ED-related vascular surgery (see Figure 1). Among seven common ED treatments, PDE-5 inhibitor had the lowest average annual costs per user of a treatment (see Figure 2). From 1999 through 2001, a health plan with 100,000 members might spend $320,865 (2000 dollars) on ED care, about one tenth of the costs forecasted by Tan ($3,204,792 in 1998 dollars)1. The largest per member per month cost of ED treatment was for PED-5 inhibitor ($0.48 in 2001), followed by testosterone therapy ($0.11 in 2001). CONCLUSION: In 2001, ED imposed a modest financial burden on a health plan ($122,699 for a plan with 100,000 members). Although the use of PDE-5 inhibitor therapy had the lowest annual treatment costs per user ($121.7 in 2001), it constituted 37.08% of the annual financial burden of ED (2001), followed by testosterone therapy (8.45% or $10,369).